Finance and Economics Discussion Series (FEDS)
March 2003
A Monetary Policy Rule Based on Nominal and Inflation-Indexed Treasury Yields
Brian Sack
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.
Keywords: Monetary policy rule, inflation-indexed debt
PDF: Full Paper
Disclaimer: The economic research that is linked from this page represents the views of the authors and does not indicate concurrence either by other members of the Board's staff or by the Board of Governors. The economic research and their conclusions are often preliminary and are circulated to stimulate discussion and critical comment. The Board values having a staff that conducts research on a wide range of economic topics and that explores a diverse array of perspectives on those topics. The resulting conversations in academia, the economic policy community, and the broader public are important to sharpening our collective thinking.