This paper provides a robust structural identification of the effects of U.S. interest rates on an emerging economy's asset values. Using newly available intraday data, we investigate how surprises associated with U.S. macro data and FOMC announcements move the yield spread on a benchmark...

This paper analyzes the impact of U.S. monetary policy announcement surprises on U.S. and foreign firm-level equity prices. We find that U.S. monetary policy has important influences on foreign equity prices on average, but with considerable variation across firms. We have found that this...

This paper analyzes the role of transparency and credibility in accounting for the widely divergent macroeconomic effects of three episodes of deliberate monetary contraction: the post-Civil War deflation, the post-WWI deflation, and the Volcker disinflation. Using a dynamic general equilibrium...

Several recent studies have reached quite different conclusions about which variable is the best indicator of the stance of monetary policy. These differences likely reflect varying assumptions about bank and Federal Reserve behavior. This paper takes a detailed and comprehensive look at the...

We develop an estimated model of the U.S. economy in which agents form expectations by continually updating their beliefs regarding the behavior of the economy and monetary policy. We explore the effects of policymakers' misperceptions of the natural rate of unemployment during the late 1960s...

We explore a hypothesis about the take-off in inflation that occurred in the early 1970s. According to the expectations trap hypothesis, the Fed was pushed into producing the high inflation out of a fear of violating the public's inflation expectations. We compare this hypothesis with the...

This paper documents the impact of U.S. monetary policy announcement surprises on equity indexes in sixteen countries, covering both developed and emerging economies. Using high-frequency intraday data, I find a large and significant response of Asian, European, and Latin American equity indexes...

We introduce a novel method for estimating a monetary policy rule using macroeconomic news. Market forecasts of both economic conditions and monetary policy are affected by news, and our estimation links the two effects. This enables us to estimate directly the policy rule agents use to form...

The object of this paper is to develop an operational early warning system (EWS) that can detect financial crises. To achieve this goal the paper analyzes and extends the early warning system developed by Kaminsky, Lizondo, and Reinhart (1998) and Kaminsky and Reinhart (1999) that is based on...

In his seminal 1960 study on the dynamics of alternative exchange rate regimes, Robert Mundell proposed a theory of balance-of-payments crises in which speculators base their actions on the observed holdings of central bank foreign reserves. We examine the quantitative implications of this view...