Fed communication and the zero lower bound

Carlos Carvalho, Eric Hsu and Fernanda Nechio

FRBSF Economic Letter, 2016

Abstract: After the onset of the global financial crisis, the Federal Reserve had to rely on other tools?including communication?to work around the constraints of being unable to lower the federal funds rate below zero. One way to assess how effective these communications were is by estimating how interest rates on bonds with different maturities reacted to Fed communications before and after the zero-bound period. A measure based on news reports of Fed communications suggests that this tool gave the Fed some ability to affect long-term yields through its communications.

Date: 2016
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