TY  - JOUR
AU  - Cochrane,John H.
AU  - Piazzesi,Monika
TI  - The Fed and Interest Rates: A High-Frequency Identification
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8839
PY  - 2002
Y2  - March 2002
UR  - http://www.nber.org/papers/w8839
L1  - http://www.nber.org/papers/w8839.pdf
N1  - Author contact info:
John H. Cochrane
Booth School of Business
University of Chicago
5807 S. Woodlawn
Chicago, IL  60637
Tel: 773/702-3059
Fax: 773/702-0458
E-Mail: john.cochrane@chicagobooth.edu

Monika Piazzesi
Department of Economics
Stanford University
579 Serra Mall
Stanford, CA 94305-6072
Tel: (650) 723-9289
E-Mail: piazzesi@stanford.edu
AB  - We measure monetary policy shocks as changes in the Fed funds target rate that surprise bond markets in daily data. These shock series avoid the omitted variable, time-varying parameter, and orthogonalization problem of monthly VARs, and do not impose the expectations hypothesis. We find surprisingly large and persistent responses of bond yields to these shocks. 10 year rates rise as much as 8/10 of a percent to a one percent target shock. The usual view that monetary policy only temporarily raises long term rates and influences inflation would lead one to predict a negative long rate response.
ER  -