Economic value calculations are increasingly used to compare the predictive performance of competing models of asset returns. However, they lack a rigorous way to validate their evidence. This paper proposes a new methodology to test whether utility gains accruing to investors using competing...

This paper analyzes the Federal Reserve's major policy actions in response to the financial crisis. The analysis is divided into the pre-Lehman and post-Lehman monetary policies. Specifically, I describe the pre- and post-Lehman monetary policy actions that I believe were appropriate and those...

In February 2005 Federal Reserve Chairman Alan Greenspan noticed that the 10-year Treasury yields failed to increase despite a 150-basis-point increase in the federal funds rate as a “conundrum.” This paper shows that the connection between the 10-year yield and the federal funds rate was...

Since the late 1980s the Fed has implemented monetary policy by adjusting its target for the overnight federal funds rate. Money's role in monetary policy has been tertiary, at best. Indeed, several influential economists have suggested that money is irrelevant for monetary policy. They suggest...

On May 29, 2008, the Wall Street Journal reported that several large international banks were reporting unjustifiably low LIBOR rates. Since then two large banks, Barclays and UBS, have paid significant fines for manipulating their LIBOR rates, and additional banks are expected to be fined. This...

This paper investigates the effectiveness of forward guidance for the central banks of four countries: New Zealand, Norway, Sweden, and the United States. We test whether forward guidance improved market participants' ability to forecast future short-term and long-term rates. We find that...

This paper re-examines the validity of the Expectation Hypothesis (EH) of the term structure of US repo rates ranging in maturity from overnight to three months. We extend the work of Longstaff (2000) in two directions: (i) we implement statistical tests designed to increase test power in this...

Motivated, on the one hand, by the belief that the Fed controls the short-term rate through open market operations, and on the other, by quot;the lack of convincing proof that this is what happens,quot; Hamilton (1997) suggested that more convincing evidence of the liquidity effect could be...

The consensus in monetary policy circles that the Fed's large-scale asset purchases, known as quantitative easing (QE), have significantly reduced long-term yields is due in part to event studies, which show that long-term yields decline on QE announcement days. However, little attention has...

In February 2005, Fed Chairman Alan Greenspan referred to the decline in long-term rates in the wake of the Fed increasing the target for the federal funds rate by 150 basis points as a ldquo;conundrum.rdquo; Greenspan's remarks generated considerable interest and research. I document that the...