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Title: Monetary Policy and TIPS Yields before the Crisis

Author(s): Stefan Gerlach and Laura Moretti

Publication Date: September 2011

Keyword(s): long real interest rates, monetary policy and TIPS

Programme Area(s): International Macroeconomics

Abstract: We make three points. First, the decade before the financial crisis in 2007 was characterized by a collapse in the yield on TIPS. Second, estimated VARs for the federal funds rate and the TIPS yield show that while monetary policy shocks had negligible effects on the TIPS yield, shocks to the latter had one-to-one effects on the federal funds rate. Third, these findings can be rationalized in a New Keynesian model.

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Bibliographic Reference

Gerlach, S and Moretti, L. 2011. 'Monetary Policy and TIPS Yields before the Crisis'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=8560