A number of recent papers have explored monetary policy options, including inflation targeting and inflation forecast targeting (notably Svensson (1999a, 1999b, 2000)) and price level targeting (Wolman 2000, Batini and Yates 1999, Blinder 1999). Most papers explore "optimal" monetary policy in...

New Keynesian macroeconomic models have generally emphasized that expectations of future output are a key factor in determining current output. The theoretical motivation for such forward-looking behavior relies on a straightforward generalization of the well-known Euler equation for...

Using scanner data and time diaries, we document how households substitute time for money through shopping and home production. We find evidence that there is substantial heterogeneity in prices paid across households for identical consumption goods in the same metro area at any given point in...

This paper discusses a rigorous empirical standard for monetary policy models. The motivation for this discussion is that, if one wishes to conduct welfare analysis , one must be reasonably confident that the model provides a good approximation to underlying consumer and firm behavior over the...

The effect of wealth on consumption is an issue of longstanding interest to economists. Analysts believe that fluctuations in household wealth have driven major swings in economic activity. This paper considers so-called wealth effects—the impact of changes in wealth on household consumption...

As has been widely observed, the volatility of GDP has declined since the mid-1980s compared with prior years. One leading explanation for this decline is that monetary policy improved significantly in the later period. We utilize a cross-section of 2-digit manufacturing and trade industries to...

This paper analyzes the maturity structure of term premia using McCulloch's U.S. Treasury yield curve data from 1953-91, allowing expected returns to vary across time. One-, three-, six-, and twelve-month holding period returns on maturities up to five years are projected on three ex ante...

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...

I analyze the effects of a favorable shift in expected future productivity on the current level of investment and the real interest rate. In a standard RBC model, an increase in expected future productivity raises the real rate, but decreases the current level of investment for plausible...

The Pure Expectations Hypothesis has long served as the preeminent benchmark model of the relationship between the yields on bonds of different maturities. When coupled with rational expectations, however, most empirical renderings of the model fail miserably. This paper explores the possibility...