Independence is the hallmark of modern central banks, but independence is a mutable and fragile concept, because the governments to whom central banks are ultimately responsible can have objectives that take precedence over price stability. This paper traces the Federal Reserve’s emergence as...

Vector autoregressions with Markov-switching parameters (MS-VARs) offer dramatically better data fit than their constant-parameter predecessors. However, computational complications, as well as negative results about the importance of switching in parameters other than shock variances, have...

This paper presents a 16-variable Bayesian VAR forecasting model of the U.S. economy for use in a monetary policy setting. The variables that comprise the model are selected not only for their effectiveness in forecasting the primary variables of interest, but also for their relevance to the...

This paper analyzes the impact of capital market openness on exchange rate pass-through and subsequently on the social loss function in an inflation-targeting small open economy under a pure commitment policy. Applying the intuition behind the macroeconomic trilemma, the author examines whether...

The dollar’s depreciation during the early floating rate period, 1973–1981, was a symptom of the Great Inflation. In that environment, sterilized foreign exchange interventions were ineffective in halting the dollar’s decline, but they showed a limited ability to smooth dollar movements....

Understanding why the prices of commodities, like copper, increase or decrease is one of the many pieces of the puzzle that we as policymakers try to fit together to help us figure out how the economy and inflation will perform in the future. Inflation is what the Federal Reserve can control -...

In a speech at Oberlin College, Federal Reserve Bank of Cleveland President and CEO Sandra Pianalto described the issues the Federal Reserve considers when making monetary policy decisions. She also gave her outlook on the economy and discussed why she decided that purchasing additional Treasury...

In a speech at Case Western Reserve University, Federal Reserve Bank of Cleveland President and CEO Sandra Pianalto discussed how the recovery is unfolding, focusing on the stubborn nature of high unemployment and her concern about our uncomfortably low rate of inflation. She also explained why...