Can Higher Federal Funds Rates Control Mortgage Lendingduring High Inflation and High House Prices in Absence of Reserve Requirements?

14 Pages Posted: 13 Mar 2024

See all articles by Mohammad Saiful Islam

Mohammad Saiful Islam

University of Siegen

Jascha-Alexander Koch

University Siegen - School of Economic Disciplines; University of Siegen

Abstract

The U.S. is facing higher inflation since December 2020 along with higher house prices. After a sharp increase, house prices have started to decline very recently even more drastically – reminding us of the global financial crisis 2007–08. Rather late, from December 2021 onwards, the Fed started to increase the Fed fund rate. However, it is unclear whether the Fed funds rate can control bank lending activities – especially, mortgage lending. Surprisingly, our results suggest that the Fed funds rate fails to control mortgage lending during high inflation and high house prices in the absence of bank reserve requirements.

Keywords: federal reserve funds rates, U.S. banks, inflation, house sales price, mortgage loan, bank reserve requirements

Suggested Citation

Islam, Mohammad Saiful and Koch, Jascha-Alexander, Can Higher Federal Funds Rates Control Mortgage Lendingduring High Inflation and High House Prices in Absence of Reserve Requirements?. Available at SSRN: https://ssrn.com/abstract=4757302 or http://dx.doi.org/10.2139/ssrn.4757302

Mohammad Saiful Islam

University of Siegen ( email )

Hoelderlinstrasse 3
57068 Siegen, 57068
Germany

Jascha-Alexander Koch (Contact Author)

University Siegen - School of Economic Disciplines ( email )

Unteres Schloss
Post Box 29
Siegen, 57072
Germany

University of Siegen ( email )

Hoelderlinstrasse 3
57068 Siegen, NRW 57068
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
34
Abstract Views
196
PlumX Metrics