Authors:

  • Samuel Hanson
  • Jeremy Stein

Excerpt

Monetary Policy and Long-Term Real Rates. Samuel G. Hanson, Jeremy Stein, April 2014, Paper. "Changes in monetary policy have surprisingly strong effects on forward real rates in the distant future. A 100 basis point increase in the two-year nominal yield on an FOMC announcement day is associated with a 42 basis point increase in the ten-year forward real rate. This finding is at odds with standard macro models based on sticky nominal prices, which imply that monetary policy cannot move real rates over a horizon longer than that over which all prices in the economy can readjust..." Link