TY  - JOUR
AU  - Kuttner,Kenneth
TI  - Can Central Banks Target Bond Prices?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12454
PY  - 2006
Y2  - August 2006
UR  - http://www.nber.org/papers/w12454
L1  - http://www.nber.org/papers/w12454.pdf
N1  - Author contact info:
Kenneth Kuttner
Department of Economics
Williams College
South Academic Building
24 Hopkins Hall Drive
Williamstown, MA 01267
Tel: 413-597-2300
E-Mail: kenneth.n.kuttner@williams.edu
AB  - This paper addresses the possible role of bond prices as operating or intermediate targets for monetary policy.  The paper begins with a brief review of the mechanisms through which a central bank could, in theory, influence long-term interest rates, and continues with a brief narrative overview of debt management policies in the U.S., tracing their effects on the maturity distribution of outstanding publicly-held Treasury debt and the composition of the assets held by the Federal Reserve System.  The empirical section presents new econometric evidence on the effects of these policies on expected excess holding returns (“term premia”), demonstrating that changes in the Fed’s holdings of long-term securities have had statistically significant and economically meaningful effects on the term premia associated with Treasury securities with maturities in the two- to five-year range.
ER  -