The Fed, the Bond Market, and Gradualism in Monetary Policy

Jeremy C. Stein · Adi Sunderam

77 citations0/0 files storedThe Journal of Finance

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Monetary Policy and Economic Impact Global Financial Crisis and Policies Economic theories and models

Abstract

ABSTRACT We develop a model of monetary policy with two key features: the central bank has private information about its long‐run target rate and is averse to bond market volatility. In this setting, the central bank gradually impounds changes in its target into the policy rate. Such gradualism represents an attempt to not spook the bond market. However, this effort is partially undone in equilibrium, as markets rationally react more to a given move when the central bank moves more gradually. This time‐consistency problem means that society would be better off if the central bank cared less about the bond market.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 77 citations exist upstream.

References

1985Continuous Auctions and Insider Trading 1993Discretion versus policy rules in practice 1977Rules Rather than Discretion: The Inconsistency of Optimal Plans 1985The Optimal Degree of Commitment to an Intermediate Monetary Target 1983Rules, discretion and reputation in a model of monetary policy 1999Managerial Incentive Problems: A Dynamic Perspective 1989The federal funds rate and the channels of monetary transmission 1989Efficient Capital Markets, Inefficient Firms: A Model of Myopic Corporate Behavior

Cited by

2016The Deposits Channel of Monetary Policy 2018Shaping Expectations and Coordinating Attention: The Unintended Consequences of FOMC Press Conferences 2020Financial Market Risk Perceptions and the Macroeconomy*2021A Model of Two Days: Discrete News and Asset Prices 2020Supervisory Incentives in a Banking Union 2021Rate-Amplifying Demand and the Excess Sensitivity of Long-Term Rates

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.