The zero lower bound on nominal interest rates has constrained the Federal Reserve’s setting of the overnight federal funds rate for over three years running. According to many macroeconomic models, such an extended period of being stuck at the zero bound has important implications for the...

This paper quantifies the role of alternative shocks in accounting for the recent declines in Japanese saving rates and interest rates and provides some projections about their future course. We consider three distinct sources of variation in saving rates and real interest rates: changes in...

This article assesses the importance of the zero lower bound on nominal interest rates for the conduct of monetary policy. The article employs a small, forward-looking model developed by Fuhrer and Moore. The model is simulated under several policy rules that involve either high or low inflation...

Real output is strongly correlated with the short-term nominal rate of interest. However, standard models of aggregate demand suggest that real output should be correlated with an expected long-term real rate of interest. We argue that the observed output-nominal rate correlation is an artifact...

How do interest rates react to news? This paper presents a new methodology, based on a simple dynamic term structure model, which provides for an integrated analysis of the effects of monetary policy actions and macroeconomic news on the term structure of interest rates. I find several new...

Previous research has emphasized the portfolio balance effects of Federal Reserve bond purchases, in which a reduced bond supply lowers term premia. In contrast, we find that such purchases have important signaling effects that lower expected future short term interest rates. Our evidence comes...

Presentation to the Swiss National Bank Research Conference, Zurich, Switzerland, September 23, 2011

Although it is generally recognized that the equilibrium real interest rate (ERR) varies over time, most recent work on policy analysis has been carried out under the assumption that this rate is constant. We show how this assumption can affect inferences about the conduct of policy in two...

Estimated monetary policy rules often appear to indicate a sluggish partial adjustment of the policy interest rate by the central bank. In fact, such evidence does not appear to be persuasive, since the illusion of monetary policy inertia may reflect spuriously omitted persistent influences on...