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monetary base and the price level at these times differed from the post-World War I1 experience in ways predicted by the theory …
Persistent link: https://www.econbiz.de/10013139987
Persistent link: https://www.econbiz.de/10012784705
Central banks no longer set the short-term interest rates that they use for monetary policy purposes by manipulating the supply of banking system reserves, as in conventional economics textbooks; today this process involves little or no variation in the supply of central bank liabilities. In...
Persistent link: https://www.econbiz.de/10013141286
We measure monetary policy shocks as changes in the Fed funds target rate that surprise bond markets in daily data. These shock series avoid the omitted variable, time-varying parameter, and orthogonalization problem of monthly VARs, and do not impose the expectations hypothesis. We find...
Persistent link: https://www.econbiz.de/10013245301
This paper reconsiders a result obtained by Sargent and Wallace, namely, that price level indeterminacy obtains in their well-known model if the monetary authorities adopt a policy feedback rule for the interest rate rather than the money stock. Since the Federal Reserve seems often to have used...
Persistent link: https://www.econbiz.de/10013219724
We analyze a new class of equilibria that emerges when a central bank conducts monetary policy by setting an interest rate (as an arbitrary function of its available information) and letting the private sector set the quantity traded. These equilibria involve a run on the central bank's interest...
Persistent link: https://www.econbiz.de/10013085500
We find that in 1989-1996, when U.S. monetary policy tightly targeted overnight fed funds rates, the volatility and persistence of spreads between target and term fed funds levels were larger for longer-maturity loans. We show that such patterns are consistent with an expectational model where...
Persistent link: https://www.econbiz.de/10012763661
High interest rates to defend the exchange rate signal that a government is committed to fixed exchange rates, but may also signal weak fundamentals. We test the effectiveness of the interest rate defense by disaggregating into the effects on future interest rates differentials, expectations of...
Persistent link: https://www.econbiz.de/10012778233
In this paper we calculate robustly optimal monetary policy rules for several variants of a simple optimizing model of the monetary transmission mechanism with sticky prices and/or wages. We discuss representations of optimal policy both in terms of interest-rate feedback rules that generalize...
Persistent link: https://www.econbiz.de/10013236679
Policymakers increasingly view short-term nominal interest rates as the main instrument of monetary policy, often in conjunction with some inflation target. Interest rates on short-term indexed government debt (i.e., a real interest rate) have also been used as policy instruments. To understand...
Persistent link: https://www.econbiz.de/10013237245