Research

Debt management decisions have macroeconomic effects comparable to monetary policy. Using high-frequency movements in interest rate futures around U.S. Treasury issuance announcements, we identify a Treasury policy shock—an unanticipated change in public debt supply across maturities. A shock that raises the five-year Treasury yield transmits strongly to corporate borrowing rates, tightens credit conditions, and lowers industrial production significantly. These effects closely mirror those of a conventional monetary policy tightening. The only distinction lies in the yield curve response: while long-term treasury yields increase significantly, the shock has minimal effects on short-term interest rates. We show that this pattern reflects the Federal Reserve’s sterilization of short-term Treasury issuance, while issuance at longer maturities is only partially offset.

This paper studies how buyer–seller bargaining powers shape monetary non–neutrality. When sellers have stronger bargaining power, the economy operates in an excess-supply regime and the Phillips curve is upward-sloping. When buyers have a stronger bargaining power, the economy operates in an excess-demand regime, and the Phillips curve is downward-sloping. Bargaining power smoothly parameterises the transition between the two regimes. In the knife-edge case, when the two powers cancel out, the Phillips curve becomes vertical and the economy approximates the flexible-price outcome. In this case, inflation is no longer costly. By allowing bargaining power to vary, the model places the insights of the general disequilibrium literature on an equilibrium footing.