I don't pretend to be an expert on the subject, but the signal used to work relatively well, although the term structure was not rigid. If it does not now, maybe investors don't think that Greenspan will risk popping the bubble before he leaves.
On Wed, Jun 01, 2005 at 03:29:21PM -0700, Jim Devine wrote: > if raising the FF rate is taken as a sign of the intentions of the > Fed, that should raise the expected future short-term rates. All else > constant, that raises the long-term rate (which equals an average of > the current and future expected short-term rates plus a maturity > premium). > > Michael Perelman wrote: > Right, but that linkage never seemed to be > particularly strong. It always seemed to be more a signal of > intentions.< > > -- > Jim Devine > "Segui il tuo corso, e lascia dir le genti." (Go your own way > and let people talk.) -- K. Marx, paraphrasing Dante A. -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail michael at ecst.csuchico.edu
