Arnold Kling

Can Greenspan Steer?

Arnold Kling, Great Questions of Economics
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If you look at the Federal Funds rate, then interest rate have not moved since last December. However, long-term real rates have declined. This led me to wonder how much power the Fed really has over interest rates.

Federal Reserve Chairman Alan Greenspan can spin his steering wheel (the Federal Funds rate), but the correlation between those actions and the direction of interest rates in general is weak and inconsistent.

Discussion Question. What are the pros and cons for using the long-term real interest rate as an indicator of monetary policy?

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