This paper considers the uncertainty associated with upcoming Federal Open Market Committee (FOMC) announcements and the extent to which the market begins to set up for such announcements well before they actually occur. We demonstrate that markets set up well in advance of known announcement...

The effect of money stock announcements on the Federal funds rate has been attributed informally to the information conveyed by the announcements about aggregate reserve demand. This "Aggregate Information Hypothesis" explains the effect without reference to Federal Reserve intervention in the...

We introduce liquidity frictions into an otherwise standard DSGE model with nominal and real rigidities and ask: Can a shock to the liquidity of private paper lead to a collapse in short-term nominal interest rates and a recession like the one associated with the 2008 U.S. financial crisis? Once...

We evaluate the effect of the Federal Reserve's purchase of long-term Treasuries and other long-term bonds ("QE1" in 2008-2009 and "QE2" in 2010-2011) on interest rates. Using an event-study methodology we reach two main conclusions. First, it is inappropriate to focus only on Treasury rates as...

Households' and firms' subjective inflation expectations play a central role in macroeconomic and intertemporal microeconomic models. We discuss how subjective inflation expectations are measured, the patterns they display, their determinants, and how they shape households' and firms' economic...

I extend the methods of Gürkaynak, Sack, and Swanson (2005) to separately identify the effects of Federal Reserve forward guidance and large-scale asset purchases (LSAPs) during the 2009-15 U.S. zero lower bound (ZLB) period. I find that both forward guidance and LSAPs had substantial and...

In recent years, central banks have increasingly turned to "forward guidance" as a central tool of monetary policy, especially as interest rates around the world have hit the zero lower bound. Standard monetary models imply that far future forward guidance is extremely powerful: promises about...

Forward guidance about future policy settings, in the form of a published policy-rate path, has for many years been a natural part of normal monetary policy for several central banks, including the Reserve Bank of New Zealand and the Swedish Riksbank. More recently, the Federal Reserve has...

This paper offers an explication of the hump-shaped response of real economic activity to changes in monetary policy, focusing on the particular channel operating through new home sales. I suggest that the conventional notion of a monetary policy shock as a surprise change in the fed funds rate...

We assess the power of forward guidance--promises about future interest rates--as a monetary tool in a liquidity trap using a quantitative incomplete-markets model. Our results suggest the effects of forward guidance are negligible. A commitment to keep future nominal interest rates low for a...