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Liquidity Effects, Monetary Policy, and the Business Cycle

Eichenbaum, Martin; Christiano, Lawrence J. - 2022

This paper presents new empirical evidence to support the hypothesis that positive money supply shocks drive short-term interest rates down. We then present a quantitative, general equilibrium model which is consistent with the hypothesis. The two key features of our model are that (i) money...

Persistent link: https://www.econbiz.de/10013324130

Liquidity Effects and the Monetary Transmission Mechanism

Christiano, Lawrence J.; Eichenbaum, Martin - 2021

liquidity effects. This paper discusses the basic frictions and mechanisms underlying this new class of models and investigates … long-lasting, quantitatively significant liquidity effects, as well as persistent increases in aggregate economic activity …

Persistent link: https://www.econbiz.de/10013228629

Identification and the Liquidity Effect of a Monetary Policy Shock

Christiano, Lawrence J.; Eichenbaum, Martin - 2021

Conventional wisdom holds that unanticipated expansionary monetary policy shocks cause transient but persistent decreases in real and nominal interest rates. However a number of econometric studies argue that the evidence favors the opposite view, namely that these shocks actually raise, rather...

Persistent link: https://www.econbiz.de/10013239154

The Returns to Currency Speculation

Burnside, A. Craig - 2010

Currencies that are at a forward premium tend to depreciate. This 'forward-premium puzzle' represents an egregious deviation from uncovered interest parity. We document the properties of returns to currency speculation strategies that exploit this anomaly. We show that these strategies yield...

Persistent link: https://www.econbiz.de/10012760675

The Returns to Currency Speculation in Emerging Markets

Burnside, A. Craig - 2007

The carry trade strategy involves selling forward currencies that are at a forward premium and buying forward currencies that are at a forward discount. We compare the payoffs to the carry trade applied to two different portfolios. The first portfolio consists exclusively of developed country...

Persistent link: https://www.econbiz.de/10012777610

Assessing Structural Vars

Christiano, Lawrence J. - 2006

This paper analyzes the quality of VAR-based procedures for estimating the response of the economy to a shock. We focus on two key issues. First, do VAR-based confidence intervals accurately reflect the actual degree of sampling uncertainty associated with impulse response functions? Second,...

Persistent link: https://www.econbiz.de/10012779825

Flights to safety

Baele, Lieven; Bekaert, Geert; Inghelbrecht, Koen; Wei, Min - 2012

Despite a large and growing theoretical literature on flights to safety, there does not appear to exist an empirical characterization of flight-to-safety (FTS) episodes. Using only data on bond and stock returns, we identify and characterize flight to safety episodes for 23 countries. On...

Persistent link: https://www.econbiz.de/10011590578

Liquidity and Expected Returns : Lessons from Emerging Markets

Bekaert, Geert - 2012

Given the cross-sectional and temporal variation in their liquidity, emerging equity markets provide an ideal setting … to examine the impact of liquidity on expected returns. Our main liquidity measure is a transformation of the proportion … of zero daily firm returns, averaged over the month. We find that our liquidity measures significantly predict future …

Persistent link: https://www.econbiz.de/10012755671

Fiscal Policy in the Aftermath of 9/11

Eichenbaum, Martin; Fisher, Jonas D. M. - 2022

This paper investigates the nature of U.S. fiscal policy in the aftermath of 9/11. We argue that the recent dramatic fall in the government surplus and the large fall in tax rates cannot be accounted for by either the state of the U.S. economy as of 9/11 or as the typical response of fiscal...

Persistent link: https://www.econbiz.de/10014072322

Fiscal Shocks in an Efficiency Wage Model

Burnside, A. Craig; Eichenbaum, Martin; Fisher, Jonas D. M. - 2022

This paper analyzes the ability of a general equilibrium efficiency wage model to account for the estimated response of hours worked and of real wages to a fiscal policy shock. Our key finding is that the model cannot do so unless we make the counterfactual assumption that marginal tax rates are...

Persistent link: https://www.econbiz.de/10013308467