While the global financial crisis was centered in the United States, it led to a surprising appreciation in the dollar, suggesting global dollar illiquidity. In response, the Federal Reserve partnered with other central banks to inject dollars into the international financial system. Empirical...

This paper reexamines the implications of the zero lower bound on interest rates for monetary policy and the optimal choice of steady-state inflation in light of the experience of the recent global recession. There are two main findings. First, the zero lower bound did not materially contribute...

An “expansionary” monetary policy that increases the growth rate of bank reserves is generally believed by policy makers to induce a “liquidity effect”, or a persistent decline in short-term nominal interest rates, that stimulates real activity. Christiano, et al. (1991,1995,1997) have...

An “expansionary” monetary policy that increases the growth rate of bank reserves is generally believed by policy makers to induce a “liquidity effect”, or a persistent decline in short-term nominal interest rates, that stimulates real activity. Christiano, et al. (1991,1995,1997) have...

A number of recent papers have used different financial market instruments to measure near-term expectations of the federal funds rate and the high-frequency changes in these instruments around FOMC announcements to measure monetary policy shocks. This paper evaluates the empirical success of a...

While most empirical analysis of prediction markets treats prices of binary options as predictions of the probability of future events, Manski (2004) has recently argued that there is little existing theory supporting this practice. We provide relevant analytic foundations, describing sufficient...

Interest in prediction markets has increased in the last decade, driven in part by the hope that these markets will prove to be valuable tools in forecasting, decisionmaking and risk management--in both the public and private sectors. This paper outlines five open questions in the literature,...

This paper describes potential new markets for long-term inflation risk, and shows the relationship such markets would have to other potential new markets, markets for long-term claims on income aggregates. One inflation-risk market which would be very useful is a market for long-term (or...

Speech to the Stanford Institute for Economic Policy Research, Stanford, California, April 3, 2008