TY  - JOUR
AU  - Warnock,Francis E.
AU  - Warnock,Veronica Cacdac
TI  - International Capital Flows and U.S. Interest Rates
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12560
PY  - 2006
Y2  - October 2006
UR  - http://www.nber.org/papers/w12560
L1  - http://www.nber.org/papers/w12560.pdf
N1  - Author contact info:
Francis E. Warnock
Darden Business School
University of Virginia
Charlottesville, VA 22906-6550
Tel: 434/924-6076
Fax: 434/243-8945
E-Mail: warnockf@darden.virginia.edu

Veronica Warnock
School of Architecture
University of Virginia
Campbell Hall
P.O. Box 400122
Charlottesville, VA 22904-4122
Tel: 434-243-2342
E-Mail: vwarnock@virginia.edu
M1  - published as forthcoming, Journal International Money and Finance
AB  - Foreign official purchases of U.S. government bonds have an economically large and statistically significant impact on long-term interest rates.  Federal Reserve credibility, as evidenced by dramatic reductions in both long-term inflation expectations and the volatility of long rates, contributed much to the decline of long rates in the 1990s.  More recently, however, foreign flows have become important.  Controlling for various factors given by a standard macroeconomic model, we estimate that had there been no foreign official flows into U.S. government bonds over the past year, the 10-year Treasury yield would currently be 90 basis points higher.  Our results are robust to a number of alternative specifications.
ER  -