Concretely, over a sample period from 1999 to 2012, a 100 basis point increase in the 2-year nominal yield on FOMC announcement day – which we take as a proxy for a change in the expected path of the federal funds rate over the following several quarters – is associated with a 42 basis point increase in the 10-year forward overnight real rate, extracted from the yield curve for Treasury inflation-protected securities (TIPS).3 On the one hand, this finding is at odds with standard New Keynesian macro models, in which the central bank’s ability to influence real variables stems from goods prices that are sticky in nominal terms.
Under this initiative, the Eurosystem will consider purchasing simple and transparent asset-backed securities with underlying assets consisting of claims against the euro area non-financial private sector, taking into account the desirable changes in the regulatory environment, and will work with other relevant institutions to that effect.