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Preface -- Chapter 1. Long-term interest rates: a survey / Council of Economic Advisors -- Chapter 2. The global saving glut and the U.S. current account deficit / Ben S. Bernanke -- Index

Movements in long‐term interest rates Granger‐cause movements in the target federal funds rate, but not vice versa, during 1990–2001. This implies that changes in the monetary policy stance, as measured by the target rate, are predicted by the bond market. Moreover, even innovations to the target rate have little effect on long‐term interest rates. The policy instrument seems to be responding to information that is already impounded in the bond market. In sharp contrast, during an earlier period, changes in the target federal funds rate are mostly unanticipated by the bond market, and innovations to the policy target have a large and significant effect on long‐term interest rate. (JEL E52, E43)

This paper examines the transmission mechanism through which unconventional monetary policy affects long-term interest rates. I construct a real-time measure summarizing market projections of the magnitude and duration of the Federal Reserve's Large Scale Asset Purchases (LSAP) program, and analyze the determination of term premiums and expectations of future short-term interest rates in a sample spanning more than two decades. Empirical findings suggest that the LSAP has effectively lowered the long-term Treasury bond yields, through both ""signaling"" and ""portfolio balance"" channels. On t