This paper investigates two different interpretations of the same empirical finding that long-term market rates Granger cause policy-controlled rates. Pollin (1991) interprets the finding in the usual manner (the structural position). Moore (1991) interprets the causality relationship in reverse...

Empirical relations between the federal funds rate and long-term interest rates are analyzed by employing the vector error correction modeling and cointegration techniques. The findings reveal a cointegration relation and a unidirectional causality from the federal funds rate to the long-term...

Two subperiods, 1987:02-1994:01 and 1994:02-2002:05, are selected for examining the relation between the federal funds rate and the prime rate. Empirical evidence from both sample periods reveals a positive cointegration relation representing a pass-through from the federal funds rate to the...