A Monetary Policy Rule Based on Nominal and Inflation-Indexed Treasury Yields

descriptionPublicationkeyboard_double_arrow_right Article , Preprint 01 Jan 2003Publisher:Board of Governors of the Federal Reserve SystemJournal:Finance and Economics Discussion Series, volume 2,003, pages 1-16 (issn: 1936-2854,

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Authors: Brian P. Sack;

doi: 10.17016/feds.2003.07 , 10.2139/ssrn.386922

A Monetary Policy Rule Based on Nominal and Inflation-Indexed Treasury Yields

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Abstract

The yields on nominal and inflation-indexed Treasury debt securities can be used to derive a proxy for the inflation expectations of financial market participants. This paper finds that one such measure has been an effective predictor of monetary policy decisions by the Federal Reserve since 1999. This finding suggests that the inflation compensation measure serves as a summary statistic for the factors that drive monetary policy decisions.

Related Organizations

Federal Reserve Board of Governors
United States
Federal Reserve System
United States
Federal Reserve
United States

Keywords

Monetary policy ; Government securities ; Inflation-indexed bonds

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