Cracking the conundrum
By: David K. Backus, Jonathan H. Wright.
Contributors: Wright, Jonathan H.; National Bureau of Economic Research.
Series: NBER working paper series -- no. 13419.; Working paper series (National Bureau of Economic Research) -- working paper no. 13419.
Publisher: National Bureau of Economic Research
Published: 2007
Place of publication: Cambridge, Mass
Language: eng
Number of pages: 34
Subjects: Monetary policy -- United States; Macroeconomics -- Forecasting
Description: 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.
Notes: "September 2007"

Includes bibliographical references (p. 21-22).

Also available in PDF from the NBER World Wide Web site (www.nber.org).