This paper presents a quantitative model for describing data from modulation-detection and modulation-masking experiments, which extends the model of the “effective” signal processing of the auditory system described in Dau et al. [J. Acoust. Soc. Am.99, 3615–3622 (1996)]. The new element in the present model is a modulation filterbank, which exhibits two domains with different scaling. In the range 0–10 Hz, the modulation filters have a constant bandwidth of 5 Hz. Between 10 Hz and 1000 Hz a logarithmic scaling with a constantQvalue of 2 was assumed. To preclude spectral effects in temporal processing, measurements and corresponding simulations were performed with stochastic narrow-band noise carriers at a high center frequency (5 kHz). For conditions in which the modulation rate(fmod)was smaller than half the bandwidth of the carrier(Δf),the model accounts for the low-pass characteristic in the threshold functions [e.g., Viemeister, J. Acoust. Soc. Am.66, 1364–1380 (1979)]. In conditions withfmod>Δf/2,the model can account for the high-pass characteristic in the threshold function. In a further experiment, a classical masking paradigm for investigating frequency selectivity was adopted and translated to the modulation-frequency domain. Masked thresholds for sinusoidal test modulation in the presence of a competing modulation masker were measured and simulated as a function of the test modulation rate. In all cases, the model describes the experimental data to within a few dB. It is proposed that the typical low-pass characteristic of the temporal modulation transfer function observed with wide-band noise carriers is not due to “sluggishness” in the auditory system, but can instead be understood in terms of the interaction between modulation filters and the inherent fluctuations in the carrier.