Evidence from vector autoregressions indicates that the impact of interest rate shocks on macroeconomic aggregates can substantially be affected by the so-called cost channel of monetary transmission. In this paper we apply a structural approach to examine the relevance of the cost channel for...

We provide evidence that Federal Reserve’s money supply can be characterized by a simple rule, whereby the growth rate of nonborrowed reserves depends on expected in‡ation. The Volcker-Greenspan era is found to be associated with a negative in‡ation elasticity, whereas our estimates...

In this paper we reexamine the e¤ects of monetary policy shocks by exploiting the information contained in open market operations. A sticky price model is developed where money is the counterpart of securities deposited at the central bank. The model’s solution reveals that a rise in central...

Central bank behavior is often summarized by simple rules for operat-ing targets, i.e., for a short-run nominal interest rate or for a money growth rate. In this paper we examine conditions under which these rules lead to identical fundamental solutions of a conventional business cycle model....

In this paper we examine the local determinacy conditions for three monetary policy regimes in a business cycle model with staggered price setting. The central bank either controls the nominal interest rate, the money growth rate, or it conducts open market operations and controls the...