Furthermore, expectations about future short-term interest rates, which determine a substantial part of the movement of long-term interest rates, also depend upon macroeconomic variables. For instance, when the Federal Reserve raises the federal funds rate in response to high inflation, expectations of future inflation, economic activity, and the path of the federal funds rate all contribute to the determination of the long-term interest rates. Therefore, one would expect macroeconomic variables and modeling exercises to be quite informative in explaining and forecasting the yield-curve movements. However, until very recently, standard macroeconomic models have not incorporated long-term interest rates or the yield curve. And even when they have, as in Fuhrer and Moore (1995), most of the attention is still on the correlation between the real economy and the shortest-term interest rate in the model rather than on the whole yield curve.