Monetary Policy Wedges and the Long-term Liabilities of Households and Firms / Jules H. van Binsbergen, Marco Grotteria.

Format:

Book

Author/Creator:

van Binsbergen, Jules H.

Contributor:

National Bureau of Economic Research.

Grotteria, Marco.

Series:

Working Paper Series (National Bureau of Economic Research) no. w32137.

NBER working paper series no. w32137

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2024.

Summary:

We examine the transmission of monetary policy shocks to the long-duration liabilities of households and firms using high-frequency variation in 10-year swap rates around FOMC announcements. We find that four weeks after the announcement mortgage rates move one-for-one with 10-year swap rates, leaving little explanatory power for mortgage concentration, bank market power, or credit risk. Variation in credit risk does materially affect monetary policy transmission to corporate bonds. Expected future short rates and term premia play a significant role in driving both mortgage rates and corporate bond yields, which explains the Federal Reserve's increased focus on these quantities.

Notes:

Print version record

February 2024.