Samuel G. Hanson

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Monetary Policy and Long-Term Real Rates

Samuel G. Hanson and Jeremy C. Stein

Samuel G. Hanson and Jeremy C. Stein document that distant real forward rates react strongly to news about the future stance of monetary policy. These movements in forward rates appear to reflect changes in term premia, which largely accrue over the next year, as opposed to varying expectations about future real rates. The evidence suggests that one driving force behind time-varying term premia is the behavior of yield-oriented investors, who react to a cut in short rates by increasing their demand for longer-term bonds, thereby putting downward pressure on long-term rates. Read More

Are There Too Many Safe Securities? Securitization and the Incentives for Information Production

Samuel G. Hanson and Adi Sunderam

Markets for near-riskless securities have suffered numerous shutdowns in the last 40 years, with the recent financial crisis the most prominent example. This suggests that instability could be a general characteristic of such markets, not just a one-time problem associated with the subprime mortgage crisis. Professors Samuel G. Hanson and Adi Sunderam argue that the infrastructure and organization of professional investors are in part determined by the menu of securities offered by originators. Since robust infrastructure is a public good to originators, it may be underprovided in the private market equilibrium. The individually rational decisions of originators may lead to an infrastructure that is overly prone to disruptions in bad times. Policies regulating originator capital structure decisions may help create a more robust infrastructure. Closed for comment; 0 Comments posted.