Monetary policy and long-term US interest rates |
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Authors: | Hakan Berument Richard T Froyen |
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Institution: | aBilkent University, Ankara, Turkey;bDepartment of Economics, CB#3305, University of North Carolina, Chapel Hill NC, 27599-3305, United States |
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Abstract: | This paper assesses the effect of federal funds rate innovations on longer-term US nominal interest rates across different periods. The evidence suggests that these responses change with changes in the monetary policy regime. Time periods considered are pre- and post-1979 and different Federal Reserve Chairman’s tenure. The response of longer-term interest rates to federal funds rate innovations are shown to be smaller and less persistent in the post-1979 period when the Federal Reserve placed more emphasis on inflation. |
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Keywords: | Monetary policy Long-term interest rates Time variation |
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