The behavior of term OIS rates following the three instances of FOMC verbal guidance provides no support for the efficacy of the FOMC’s forward guidance monetary policy.

Our approach offers several advantages over LSAPs as a financial mechanism to enhance forward guidance.

The enormous quantity of excess reserves can create an even greater expansion in the money supply.>

The economy is too complex to be summarized by a single rule. Economies are constantly changing in ways difficult to explain after the fact and nearly impossible to predict. Consequently, policymakers seem destined to rely on discretion rather than rules.

If investment spending is sufficiently insensitive to interest rate changes and the effect of Fed actions on interest rates is sufficiently weak, the net effect of the persistent zero interest rate policy could be negative.

Little difference in economic performance during the past two decades…is consistent with the theoretical and empirical evidence that monetary policy has no permanent effect on real variables.

The only outcome consistent with the Fisher equation holding and the FOMC’s zero interest rate policy is that the “long run” is considerably longer than 4.5 years.

In order to maintain its credibility, however, the FOMC will have to take actions consistent with achieving its stated inflation objective.

The average relationship between changes in the 10-year Treasury yield and changes in the funds rate over the 1987-2007 sample period is not indicative of the relationship between changes in the funds rate and changes in the 10-year Treasury yield that existed for more than a decade prior to the...

In contrast, most economists believe that central banks have little or no ability to directly affect employment. The effect of monetary policy actions on employment is indirect and stems from central banks’ ability to affect output growth in the short run and achieve price stability in the...