This paper makes changes in monetary policy rules (or regimes) endogenous. Changes are triggered when certain endogenous variables cross specified thresholds. Rational expectations equilibria are examined in three models of threshold switching to illustrate that (i) expectations formation...

Most empirical analyses of monetary policy have been confined to frameworks in which the Federal Reserve is implicitly assumed to exploit only a limited amount of information, despite the fact that the Fed actively monitors literally thousands of economic time series. This article explores the...

We extend Farmer's (2012b) Monetary (FM) Model in three ways. First, we derive an analog of the Taylor Principle and we show that it fails in U.S. data. Second, we use the fact that the model displays dynamic indeterminacy to explain the real effects of nominal shocks. Third, we use the fact the...

With an estimated New Keynesian model, this paper compares the "Great Recession" of 2007-09 to its two immediate predecessors in 1990-91 and 2001. The model attributes all three downturns to a similar mix of aggregate demand and supply disturbances. The most recent series of adverse shocks...

The US Federal Reserve cut interest rates more vigorously in the recent recession than the European Central Bank did. By comparison with the Fed, the ECB followed a more measured course of action. We use an estimated dynamic general equilibrium model with financial frictions to show that...

Shocks to equity options' ATM implied volatility (ATMIV) are followed by persistently lower short-term rates. Shocks to the ratio of OTM puts' over OTM calls' implied volatilities (P/C) are followed by persistently higher rates. The stock's and Treasury-bond's ATMIV indices, which measure market...

We analyze the degree to which the growing importance of sovereign wealth funds [SWFs] and the diffusion of inflation targeting and augmented Taylor rules have impacted the post crisis adjustment of Latin American Countries (LATAM) to the challenges associated with terms of trade and financial...

In this paper I use weekly data from seven emerging nations - four in Latin America and three in Asia - to investigate the extent to which changes in Fed policy interest rates have been transmitted into domestic short term interest rates during the 2000s. The results suggest that there is indeed...