An Empirical Analysis of Temporal Relation Between Mortgage Interest Rate and Residential Gasoline Price
Location
CSU 201
Start Date
24-4-2006 3:15 PM
End Date
24-4-2006 4:45 PM
Student's Major
Economics
Student's College
Social and Behavioral Sciences
Mentor's Name
Kwang Woo (Ken) Park
Mentor's Department
Economics
Mentor's College
Social and Behavioral Sciences
Description
The general economic theory confirms that there is a positive relationship between interest rate and price through the demand for money. This paper tests the statistical significance of using residential gasoline price as a leading indicator for predicting Mortgage Interest Rate in the US. In particular, time-varying betas are estimated by using Kalman filter technique that is the special case of the general state-space model in order to investigate the significance of the temporal relations between the mortgage interest rate and the gasoline price. Empirical results show that the gasoline price is leading the mortgage interest rate significantly and can be used to predict the short-run direction of mortgage interest rate.
An Empirical Analysis of Temporal Relation Between Mortgage Interest Rate and Residential Gasoline Price
CSU 201
The general economic theory confirms that there is a positive relationship between interest rate and price through the demand for money. This paper tests the statistical significance of using residential gasoline price as a leading indicator for predicting Mortgage Interest Rate in the US. In particular, time-varying betas are estimated by using Kalman filter technique that is the special case of the general state-space model in order to investigate the significance of the temporal relations between the mortgage interest rate and the gasoline price. Empirical results show that the gasoline price is leading the mortgage interest rate significantly and can be used to predict the short-run direction of mortgage interest rate.
Recommended Citation
Budhathoki, Min. "An Empirical Analysis of Temporal Relation Between Mortgage Interest Rate and Residential Gasoline Price." Undergraduate Research Symposium, Mankato, MN, April 24, 2006.
https://cornerstone.lib.mnsu.edu/urs/2006/oral-session-H/4
