>Thus to argue that statements about the Feds intentions had a more
>profound effect than rate cuts is misleading because, as I argued
>above, the former relies on the latter for credibility.
I think what's interesting about the study (and the full paper also looks at other "unconventional" policies, like buying long-term bonds) is that the markets actually believed the Fed, pushing long rates lower than they otherwise would have been. That is, the yield curve was flatter than looking at the funds rate alone would suggest. And, though gradual changes in wording of the FOMC statement, they lifted the period of extreme accommodation without any serious disruptions.
Doug