Cracking the conundrum

David Backus and Jonathan Wright

No 2007-46, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: From 2004 to 2006, the FOMC raised the target federal funds rate by 4.25 percentage points, yet long-maturity yields and forward rates fell. We consider several possible explanations for this \"conundrum.\" The most likely, in our view, is a fall in the term premium, probably associated with some combination of diminished macroeconomic uncertainty and financial market volatility, more predictable monetary policy, and the state of the business cycle.

Keywords: Monetary policy; Interest rates (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-bec, nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (34)

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Related works:
Journal Article: Cracking the Conundrum (2007)
Working Paper: Cracking the Conundrum (2007)
Working Paper: Cracking the Conundrum (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2007-46

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