Is there asymmetry in the distribution of government bond returns in developed countries? Can asymmetries be predicted using financial and macroeconomic variables? To answer the first question, we provide evidence for asymmetry in government bond returns in particular for short maturities. This...

When the central bank has information that can help the private sector predict the future better, should it communicate such information to the public? In a simple New Keynesian model, such Delphic forward guidance unambiguously reduces ex ante welfare by increasing the variability of inflation...

We explore how outcomes of optimal monetary policy with loose commitment (Schaumburg and Tambalotti, 2007; Debortoli and Nunes, 2010) can be observationally equivalent, or interpretable as outcomes of deeper optimal policy under sustainable plans (Chari and Kehoe, 1990). Both interpretations of...

This paper conducts general equilibrium (GE) estimation to evaluate the empirical contributions of macroeconomic shocks in explaining the exchange rate disconnect, excess volatility, and the uncovered interest parity (UIP) puzzles. We embed stochastic volatilities and limits-to-international...

Do financial frictions call for policy cooperation? This paper investigates the implications of financial frictions for monetary policy in the open economy. Welfare analysis shows that there are long-run gains which result from cooperation, but, dynamically, financial frictions per se do not...

We provide new insight on international monetary policy cooperation using a two-country model based on Benigno and Benigno (2006). Assuming symmetry, save for the volatility of (markup) shocks, we show that an incentive feasibility problem exists between the policymakers across national borders:...

Abandoning an objective function with multiple targets and adopting single mandate can be an effective way for a central bank to overcome the classic time-inconsistency problem. We show that the choice of a particular single mandate depends on an economy's level of trade openness and the...