Monetary policy and long-term real rates

@inproceedings{Hanson2012MonetaryPA,
  title={Monetary policy and long-term real rates},
  author={Samuel Gregory Hanson and Jerome L. Stein},
  year={2012}
}
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. Rather… CONTINUE READING
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