This paper examines monetary policy in Rudebusch and Svensson's (1999) two equation macroeconomic model when the policymaker recognizes that the model is an approximation and is uncertain about the quality of that approximation. It is argued that the minimax approach of robust control provides a...

U.S. stock volatility is 33 percent lower during wartime and periods of conflict. This is true even for World Wars I and II, which would seemingly increase uncertainty. In a seminal paper, Schwert (1989) identified the "war puzzle" as one of the most surprising facts from two centuries of stock...

Central bank balance sheet expansion is financed by commercial banks. It involves not just a substitution of liquid central bank reserves for other assets held by commercial banks, but also a counterpart alteration in commercial bank liabilities, such as in short-term deposits issued to finance...

Using a general equilibrium model of the United States economy,we examine the combined welfare cost of all taxes in the U.S. revenue system.We find that the welfare losses caused by distortionary taxation can be very large, both on average and at the margin.The marginal welfare loss to consumers...

We characterize how U.S. global systemically important banks (GSIBs) supply short-term dollar liquidity in repo and foreign exchange swap markets in the post-Global Financial Crisis regulatory environment and serve as the "lenders-of-second-to-last-resort". Using daily supervisory bank balance...

Local governments can provide services with their own employees or by contracting with private or public sector providers. We develop a model of this "make-or-buy" choice that highlights the trade-off between productive efficiency and the costs of contract administration. We construct a dataset...