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Crump, Richard K. - 2020

We estimate the elasticity of intertemporal substitution (EIS)—the response of expected consumption growth to changes …). This unique data set allows us to estimate the consumption Euler equation with no auxiliary assumptions on the properties … with the results of much of the literature. In addition, planned consumption displays excess sensitivity to expected income …

Persistent link: https://www.econbiz.de/10012856136

Balance Sheets, Exchange Rates, and International Monetary Spillovers

Akinci, Ozge - 2019

We use a two-country New Keynesian model with balance sheet constraints to investigate the magnitude of international spillovers of U.S. monetary policy. Home borrowers obtain funds from domestic households in domestic currency, as well as from residents of the foreign economy (the United...

Persistent link: https://www.econbiz.de/10012899102

Monetary Policy Frameworks and the Effective Lower Bound on Interest Rates

Mertens, Thomas M. - 2019

This paper applies a standard New Keynesian model to analyze the effects of monetary policy in the presence of a low natural rate of interest and a lower bound on interest rates. Under a standard inflation-targeting approach, inflation expectations will be anchored at a level below the inflation...

Persistent link: https://www.econbiz.de/10012867264

Exchange Rate Dynamics and Monetary Spillovers with Imperfect Financial Markets

Akinci, Ozge - 2019

We use a two-country New Keynesian model with financial frictions and dollar debt in balance sheets to investigate the foreign effects of U.S. monetary policy. Financial amplification works through an endogenous deviation from uncovered interest parity (UIP) arising from limits to arbitrage in...

Persistent link: https://www.econbiz.de/10012869554

Tying Down the Anchor : Monetary Policy Rules and the Lower Bound on Interest Rates

Mertens, Thomas M. - 2019

This paper uses a standard New Keynesian model to analyze the effects and implementation of various monetary policy frameworks in the presence of a low natural rate of interest and a lower bound on interest rates. Under a standard inflation-targeting approach, inflation expectations will be...

Persistent link: https://www.econbiz.de/10012871223

What to Expect From the Lower Bound on Interest Rates : Evidence from Derivatives Prices

Mertens, Thomas M. - 2020

This paper analyzes the effects of the lower bound for interest rates on the distributions of inflation and interest rates. We study a stylized New Keynesian model where the policy instrument is subject to a lower bound to motivate the empirical analysis. Two equilibria emerge: In the “target...

Persistent link: https://www.econbiz.de/10012851471

U.S. Monetary Policy Spillovers to Emerging Markets : Both Shocks and Vulnerabilities Matter

Ahmed, Shaghil; Akinci, Ozge; Queralto, Albert - 2021

We explore how the sources of shocks driving interest rates, country vulnerabilities, and central bank communications affect the spillovers of U.S. monetary policy changes to emerging market economies (EMEs). We utilize a two-country New Keynesian model with financial frictions and partly...

Persistent link: https://www.econbiz.de/10013221185

Interest, Reserves, and Prices

Benigno, Gianluca; Benigno, Pierpaolo - 2021

We would like to propose a new framework for monetary policy analysis that encompasses, as a special case, the Neo-Wicksellian paradigm. A general form of an aggregate-demand equation reveals a role for liquidity, as well as less effective movements in future real rates with respect to current...

Persistent link: https://www.econbiz.de/10013222541

Managing Monetary Policy Normalization

Benigno, Gianluca; Benigno, Pierpaolo - 2022

We propose a new framework for monetary policy analysis to study monetary policy normalization when exiting a liquidity trap. The optimal combination of reserves and interest rate policy requires an increase in liquidity (reserves) a few quarters after the policy rate is set at the effective...

Persistent link: https://www.econbiz.de/10013289684

Fundamental Disagreement about Monetary Policy and the Term Structure of Interest Rates

Cao, Shuo - 2020

Using a unique data set of individual professional forecasts, we document disagreement about the future path of monetary policy, particularly at longer horizons. The stark differences in short rate forecasts imply strong disagreement about the risk-return trade-off of longer-term bonds....

Persistent link: https://www.econbiz.de/10012828049