While uncovered interest parity (UIP) fails unconditionally, UIP conditional on monetary policy actions remains a cornerstone of macroeconomic models used for monetary policy analysis. We posit that monetary policy actions are partially revealed by FOMC statements and propose a new...

This paper documents two facts about countries with floating exchange rates where monetary policy controls inflation using a short-term interest rate. First, the current real exchange rate predicts future changes in the nominal exchange rate at horizons greater than two years both in sample and...

The threat of entry is an important factor in the evaluation of the potential competitive effects of proposed mergers and acquisitions. In the evaluation of proposed bank mergers, a high probability of entry, or strong potential competition, is often found to mitigate the potential...

I examine the implications of learning-based asset pricing in a model in which firms face credit constraints that depend partly on their market value. Agents learn about stock prices, but have conditionally model-consistent expectations otherwise. The model jointly matches key asset price and...

Standard dynamic stochastic general equilibrium (DSGE) models assume a Taylor rule and forecast an increase in interest rates immediately after the 2007-2009 economic recession given the predicted output and inflation, contradictory to the extended period of near-zero interest rate policy (ZIRP)...

This paper examines how monetary policy affects the riskiness of the financial sector's aggregate balance sheet, a mechanism referred to as the risk channel of monetary policy. I study the risk channel in a DSGE model with nominal frictions and a banking sector that can issue both outside equity...

This paper empirically identifies an important channel through which monetary policy affects consumer spending: homeowner balance sheets. A monetary loosening increases home values, thereby strengthening homeowner balance sheets and stimulating household spending due to a combination of...

The links between real and nominal bond risk premia and macroeconomic dynamics are explored quantitatively in a model with nominal rigidities and monetary policy. The estimated model captures macroeconomic and yield curve properties of the U.S. economy, implying significantly positive real term...

Between August 2011 and December 2012 the Federal Open Market Committee (FOMC) used date-based forward guidance to help stimulate the U.S. economy and promote its objectives of maximum employment and price stability. Some have argued that the formulation of the guidance that the FOMC used may...

We study the term structure of default-free interest rates in a sticky-price model with an occasionally binding effective lower bound (ELB) constraint on interest rates and recursive preferences. The ELB constraint induces state-dependency in the dynamics of term premiums by affecting...