The effectiveness of monetary policy hinges on the central bank's ability to influence market expectations. Central bank transparency is a means toward this end. However, the more effective the central bank is at influencing the market's expectations, the greater is the potential for market...

This paper considers whether the recent buildup in emerging market countries’ international reserves can be justified as precautionary insurance against volatility in capital flows. It presents a simple, welfare-based model of the optimal level of reserves to deal with the risk of capital...

From 2004 to 2006 the Federal Open Market Committee raised the target federal funds rate by 4.25 percentage points, yet long-maturity yields and forward rates fell. We consider several possible explanations for this conundrum of rising short-term and falling long-term interest rates. The most...