The Sensitivity of Long-Term Interest Rates: A Tale of Two Frequencies

Samuel Hanson, David Lucca and Jonathan Wright

No 20190304, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: The sensitivity of long-term interest rates to short-term interest rates is a central feature of the yield curve. This post, which draws on our Staff Report, shows that long- and short-term rates co-move to a surprising extent at high frequencies (over daily or monthly periods). However, since 2000, they co-move far less at lower frequencies (over six months or a year). We discuss potential explanations for this finding and its implications for the transmission of monetary policy.

Keywords: conundrum; interest rates; monetary policy transmission (search for similar items in EconPapers)
JEL-codes: E43 E52 (search for similar items in EconPapers)
Date: 2019-03-04
New Economics Papers: this item is included in nep-mac
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