DP8560 Monetary Policy and TIPS Yields before the Crisis
|Author(s):||Stefan Gerlach, Laura Moretti|
|Publication Date:||September 2011|
|Keyword(s):||long real interest rates, monetary policy, TIPS|
|JEL(s):||E42, E53, E58|
|Programme Areas:||International Macroeconomics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=8560|
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.