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.

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Apr 24th, 3:15 PM Apr 24th, 4:45 PM

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