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The Interrelationship between the FED’s Profit and Selected Macroeconomic Variables - L’interrelazione tra profitti della Federal Reserve e alcune variabili macroeconomiche

Osama Sweidan () and Aktham Maghyereh

Economia Internazionale / International Economics, 2014, vol. 67, issue 4, 493-516

Abstract: In this paper we provide the first empirical study on the interrelationship between the Fed’s profit and selected macroeconomic variables i.e. policy interest rate, real gross domestic product (real GDP) and price level. We extract these macroeconomic variables from a simple theoretical model. For the empirical part, we employ the unrestricted vector autoregressive (VAR) approach over the period (1959-2007). The results display that the above mentioned macroeconomic variables have statistically significant positive relationships with the Fed’s profit, with a clear dominant effect of real GDP. Moreover, the results reveal that the Fed’s profit has only a statistically significant negative relationship with the interest rate as a feedback effect. A possible policy conclusion from these results is that the Fed needs to concentrate on the expansionary monetary policy to guarantee permanent profits. - Questo studio rappresenta la prima analisi empirica sull’interrelazione tra i profitti della Federal Reserve e alcune variabili macroeconomiche quali la politica del tasso di interesse, il PIL reale e il livello dei prezzi. Per l’analisi è stato impiegato il modello VAR non ristretto per il periodo 1959-2007. Il risultato dimostra che le variabili summenzionate hanno relazioni positive statisticamente significative con i profitti della Federal Reserve, con un effetto dominante del PIL reale. Si evidenzia inoltre che l’unica relazione negativa statisticamente significativa è quella tra profitti e tasso di interesse, come effetto di retroazione. Una possibile conclusione da questi risultati potrebbe essere quella per cui la Federal Reserve dovrebbe concentrarsi su una politica monetaria espansiva se vuole ottenere profitti permanenti.

Keywords: The Fed’s Profit; Real GDP; Interest Rate; Price Level; VAR Model (search for similar items in EconPapers)
JEL-codes: C22 E58 E59 (search for similar items in EconPapers)
Date: 2014
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