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Please use this identifier to cite or link to this item: http://hdl.handle.net/2451/26052

Title: Cracking the Conundrum
Authors: K. Backus, David
H. Wright, onathan
Keywords: yield curve
forward rates
volatility
term premium
affine models
monetary policy
Issue Date: 17-May-2007
Series/Report no.: EC-07-22
Abstract: From 2004 to 2006, the FOMC raised the target federal funds rate by 4.25%, 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 and financial market volatility, more predictable monetary policy, and the state of the business cycle.
URI: http://hdl.handle.net/2451/26052
Appears in Collections:Economics Working Papers

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