##ous shocks that push inflation away from target. so even if the variance of inflation shocks is constant, the variance of inflation itself will be an endogenous function of monetary policy. another related channel through which monetary policy can influence the variance of inflation is by changing the equilibrium persistence of inflation deviations from target. in the textbook cgg model ( 1999 ), augmented with a hybrid phillips curve that features an inertial backward - looking component, the equilibrium persistence of inflation is an endogenous function of the monetary policy rule such that the more aggressively the central bank leans against exogenous shocks that push inflation away from target, the less persistent are inflation deviations from target in equilibrium. in the simple case in which equilibrium inflation is a first - order autoregressive process ( as it is in the cgg this view has also long been shared by fellow monetary policymakers. see, for example, bernanke ( 2007b ) and powell ( 2018 ). - 6model under optimal policy ), the equilibrium unconditional variance of inflation is monotonic in inflation persistence for any given constant variance of inflation shocks. of course, non - monetary factors may also have contributed to a lower variance of inflation. for example, the variance of underlying exogenous shocks to aggregate supply and demand may have fortuitously and coincidentally fallen in tandem with the adoption of inflation targeting in many countries. i will now turn to a third factor behind the decline in global bond yields, the decline in term premiums that is estimated to have occurred in many countries over the past 20 years. most studies find that term premiums have fallen substantially in major economies over the past 20 years, and that in the united states term premiums may have been negative for some time. decomposing the factors that drive equilibrium term premiums is an active area of academic research, and i will not attempt to summarize or synthesize this vast literature. 8 but i would like to emphasize what seems to me to be three contributors to the decline in the term premium in the united states and perhaps in other countries as well. 9 first, the decline in inflation volatility has almost certainly been important in driving the term premium on nominal bonds lower. the real ex - post payoff from holding a nominal bond to maturity is directly exposed to price - level risk, and thus, all else being equal, a decline in inflation volatility makes the real purchasing power of the bond ’ s payoff

2019a ). - 15 two days present cutting - edge research on the effect and measurement of risk and uncertainty and volatility, with a special focus on monetary policy and market behavior. as someone on the front lines, i look forward to learning from your insights and encourage your rich discussion over the next few days and your continued work on how to make my job easier! thank you, and good luck! - 16 references adam, klaus, and roberto m. billi ( 2007 ). “ discretionary monetary policy and the zero lower bound on nominal interest rates, ” journal of monetary economics, vol. 54 ( april ), pp. 728 – 52. bansal, ravi, and ivan shaliastovich ( 2013 ). “ a long - run risks explanation of predictability puzzles in bond and currency markets, ” review of financial studies, vol. 26 ( january ), pp. 1 – 33. bekaert, geert, eric engstrom, and steven r. grenadier ( 2010 ). “ stock and bond returns with moody investors, ” journal of empirical finance, vol. 17 ( december ), pp. 867 – 94. bernanke, ben s. ( 2007a ). “ federal reserve communications, ” speech delivered at the cato institute 25th annual monetary conference, washington, november 14, https : / / www. federalreserve. gov / newsevents / speech / bernanke20071114a. htm. — — — ( 2007b ). “ inflation expectations and inflation forecasting, ” speech delivered at the monetary economics workshop of the national bureau of economic research summer institute, cambridge, mass., july 10, https : / / www. federalreserve. gov / newsevents / speech / bernanke20070710a. htm. board of governors of the federal reserve system ( 2019a ). “ minutes of the federal open market committee, july 30 – 31, 2019, ” press release, august 21, https : / / www. federalreserve. gov / newsevents / pressreleases / monetary20190821a. htm. — — — ( 2019b ). “ minutes of the federal open market committee, september 17 – 18, 2019, ” press release, october 9, https : / / www. federalreserve. gov / newsevents / pressreleases / monetary2019