Forward Rates and Future Policy: Interpreting the Term Structure of Interest Rates

John Y. Campbell,

JYC

John Y. Campbell Harvard University

Kermit L. Schoenholtz, and

KLS

Kermit L. Schoenholtz Yale University

Robert J. Shiller

Robert J. Shiller Sterling Professor of Economics - Yale University

Discussants: Laurence Weiss

LW

Laurence Weiss

INTEREST RATES of all maturities have tended to increase in the past few
years when the level of the MI measure of the money stock announced
on Fridays has been unexpectedly large. Conversely, interest rates have
tendedt o fall when the announcementh as been surprisinglys mall. Even
very long-term interest rates, such as thirty-year government bond
yields, respond to the money surprises. The response of short- and longterm
interest rates has been sufficiently dramatic to attract considerable
attention from market analysts and academic economists