This paper presents new evidence on how asset prices respond to new information about the money stock. It shows that the information content of money stock announcements and the response of asset prices to new information in the announcements vary with changes in the monetary policy regime, the...

In this paper, we present a simple random-matching model in which different seasons translate into different propensities to consume and produce. We find that the cyclical creation and destruction of money is beneficial for welfare under a wide variety of circumstances. Our model of seasons can...

Considering time inconsistency as a problem of irreversible investment brings some neglected points to the fore. Making a policy choice in real time and under current conditions emphasizes the importance of the timing of commitment, the regret over past decisions, and the option value of not...

This paper uses a model of a small, open economy to address two monetary policy issues: 1) What restrictions on the policy rule ensure that the central bank does not introduce real indeterminacy into the economy? and 2) What is the optimal long-run rate of inflation? The model's simplicity makes...

A presentation of new evidence on the issue of Federal Reserve System credibility, examining the response pattern of asset prices to the weekly M1 announcements under different operating procedures and monetary policy regimes.

A reconsideration of the role of monetary policy in a multiperiod sticky-wage model that incorporates rational expectations and displays the natural rate property.

The Federal Reserve abandoned foreign-exchange-market intervention because it conflicted with the System’s commitment to price stability. By the early 1980s, economists generally concluded that, absent a portfolio-balance channel, sterilized foreign-exchange-market intervention did not provide...

This paper develops an adaptive learning formulation of an extension to the Ball, Mankiw, and Reis (2005) sticky information model that incorporates endogenous inattention. We show that, following an exogenous increase in the policymaker’s preferences for price vs. output stability, the...

An increasingly common approach to the theoretical analysis of monetary policy ensures that a proposed policy does not introduce real indeterminacy—and thus sunspot fluctuations—into the model economy. Policy is typically conducted in terms of directives for the nominal interest rate. This...

This working paper examines a theoretical model in which an entrepreneur’s net worth affects his ability to finance current activity. Net worth, in turn, is determined by asset prices, which can be affected by monetary policy. In this environment, the central bank plays a welfare-improving...