A central hypothesis and concern of some skeptics of European monetary union is that monetary policy coordination to secure a peg to the German mark (DM) will tie real economic performance, especially the unemployment rate, to that in Germany. Evidence on this hypothesis can be found in Austria,...

We study how the use of judgment or "add-factors" in macroeconomic forecasting may disturb the set of equilibrium outcomes when agents learn using recursive methods. We examine the possibility of a new phenomenon, which we call exuberance equilibria, in the New Keynesian monetary policy...

A primary purpose of the Federal Reserve Act of 1913 was to prevent banking panics by establishing the Federal Reserve System to function as a lender of last resort. Other types of financial crisis require similar response, however, and the Federal Reserve has repeatedly used its capacity to...

We examine the markets for one-month LIBOR futures contracts and options on those futures for a year-end price effect consistent with the previously identified year-end rate increase in one-month LIBOR. The cash market rate increase appears in forward rates and derivative prices, which allows...

Woodford (2007) argues that it is not appropriate to regard inflation in the steady state of New Keynesian models as determined by steady-state money growth. Woodford instead argues that the intercept term in the monetary authority's interest-rate policy rule determines steady-state inflation....

In this paper we study optimal monetary and fiscal policies, and the welfare costs of inflation, within the Lagos and Wright (2005) framework. Monetary equilibria may be inefficient without fiscal policy tools due to bargaining frictions. We show that subsidies in decentralized markets can be...

This paper extends the analysis of price level targeting to a model including the New-Keynesian Phillips Curve. We examine the inflation-output variability tradeoffs implied by optimal inflation and price level rules. In previous work with the Neoclassical Phillips Curve, we found that the...

Discussed at the Workshop on Monetary and Macroeconomics. Sponsored by the Federal Reserve Bank of Philadelphia, the Penn Institute of Economic Research, and the International Economic Review.

November 1, 2013. Presentation. "The Tapering Debate: Data and Tools." Financial Forum, St. Louis Regional Chamber.

Delivered at The Global Interdependence Center 2010 International Conference Series, Part II-China "Financial Interdependence in the World's Post-Crisis Capital Markets."