The unusual behavior of the federal funds and 10-year treasury rates
a conundrum or Goodhart's law?
by Daniel L. Thornton
"In February 2005, former Chairman Alan Greenspan referred to the decline in long-term rates in the wake of the Fed increasing the target for the federal funds rate by 150 basis points as a "conundrum." Greenspan's remarks generated considerable interest and research. I show that the relationship between the 10 year Treasury yield and the federal funds rate changed dramatically in the late 1980s, well in advance of Greenspan's observation. I argue that the marked change in the relationship between the federal funds rate and long-term yields is a natural consequence of Goodhart's Law"--Federal Reserve Bank of St. Louis web site.
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The unusual behavior of the federal funds and 10-year treasury rates: a conundrum or Goodhart's law?
2007, Federal Reserve Bank of St. Louis
electronic resource :
in English
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Title from PDF file as viewed on 9/17/2007.
Includes bibliographical references.
Also available in print.
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Mode of access: World Wide Web.
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