“The perceived reaction function that we saw at that time was extremely flat… even in May 2021 a half-percent inflation surprise… the two-year rate didn't move.”
CP
Carolin Pflueger
Odd Lots ·
“You can run this regression of how much do yields change onto what's the inflation surprise on that day… gives another way of getting a perceived reaction function.”
Carolin Pflueger and co-authors · Odd Lots · Why Treasuries Are 'Risky' Again
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9:13
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What was described
Estimated the perceived reaction function by running a rolling-window regression of short-term yields (e.g., two-year rate) on the inflation surprise on announcement days
Said nearby on the same subject
“We ran a regression of the forecasted Fed funds rate onto forecasted inflation and forecasted output relative to potential… on this different data, forward-looking data.”
CP
Carolin Pflueger and co-authors
Odd Lots ·
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DR
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