Global monetary conditions are often cited as a driver of commodity prices. This paper investigates the empirical relationship between U.S. monetary policy and commodity prices by means of a standard VAR system, commonly used in analyzing the effects of monetary policy shocks. The results...

We identify a crucial difference between the backwardlooking and forward-looking Phillips curve concerning the real output effects of monetary policy shocks. The backwardlooking Phillips curve predicts a strict intertemporal trade-off in the case of monetary shocks: a positive short-run response...

This paper examines empirically the role of bank market power as an internal factor influencing banks’ reaction in terms of lending and risk taking to monetary policy impulses. The analysis is carried out for the U.S. and euro-area banking sectors over the period 1997–2010. Market power is...

This paper provides new evidence on the importance of inflation expectations for variation in nominal interest rates, based on both market-based and survey-based measures of inflation expectations. Using the information in TIPS break-even rates and inflation swap rates, I document that movements...

We examine policy rate recommendations of the Bank of Canada’s Governing Council (GC) and its shadow, the C.D. Howe Institute’s Monetary Policy Council (MPC). Individual recommendations of the MPC are observed but not those of the GC. Differences in the two committees’ recommendations are...

We challenge the widely held belief that New Keynesian models cannot predict optimal positive inflation rates. In fact, interest rates are justified by the Phelps argument that monetary financing can alleviate the burden of distortionary taxation. We obtain this result because, in contrast with...

Over the past few years, the Federal Reserve’s use of unconventional monetary policy tools has received a vast amount of public attention, from discussing how these asset purchases have put downward pressure on longer-term interest rates and thus supported economic activity to evaluating the...

The United States introduced several programs in response to the financial crisis. We examine responses involving Treasury debt—the Term Securities Lending Facility (TSLF), Supplementary Financing Program (SFP), Treasury issuance, open-market operations—and associated impacts on...

We construct a model where risk shifting can be moderated by capital requirements. Imperfect information about the level of capital per unit of risk, however, introduces uncertainty about the risk exposure of intermediaries. Over-estimation of the capital held by financial intermediaries, or the...

Most central banks explain interest rate decisions, i.e., they provide a story. With committee decisions, it can be difficult to find a story that is both consistent with the decision and representative for the committee. We consider two alternative procedures: (i) vote on the interest rate and...