We estimate the elasticity of intertemporal substitution (EIS) - the elasticity of expected consumption growth with respect to variation in the real interest rate - using subjective expectations from the newly released FRBNY Survey of Consumer Expectations (SCE). This dataset is unique, since it...

Under rational expectations, monetary policy is generally highly effective in stabilizing the economy. Aggregate demand management operates through the expectations hypothesis of the term structure: Anticipated movements in future short-term interest rates control current demand. This paper...

This paper proposes a theory of the fiscal foundations of inflation based on imperfect knowledge and learning. The theory is similar in spirit to, but distinct from, unpleasant monetarist arithmetic and the fiscal theory of the price level. Because the assumption of imperfect knowledge breaks...

The goal of this paper is to present the dynamic stochastic general equilibrium (DSGE) model developed and used at the Federal Reserve Bank of New York. The paper describes how the model works, how it is estimated, how it rationalizes past history, including the Great Recession, and how it is...

We study the term structure of disagreement of professional forecasters for key macroeconomic variables. We document a novel set of facts: 1) forecasters disagree at all horizons, including the very long run; 2) the shape of the term structure of disagreement differs markedly across variables:...

Most macroeconomic models impose a tight link between expected future short rates and the term structure of interest rates via the expectations hypothesis (EH). While the EH has been systematically rejected in the data, existing work evaluating the EH generally assumes either full-information...

Using a New Keynesian Phillips curve, we document the rapid and persistent increase in the natural rate of unemployment, ut*, in the aftermath of the pandemic and characterize its implications for inflation dynamics. While the bulk of the inflation surge is attributed to temporary supply...

Using a unique data set of individual professional forecasts, we document disagreement about the future path of monetary policy, particularly at longer horizons. The stark differences in short rate forecasts imply strong disagreement about the risk-return trade-off of longer-term bonds....

We model the United States macroeconomic and financial sectors using a formal and unified econometric model. Through shrinkage, our Bayesian VAR provides a flexible framework for modeling the dynamics of thirty-one variables, many of which are tracked by the Federal Reserve. We show how the...

Economic theory predicts that intertemporal decisions depend critically on expectations about future outcomes. Using the universe of professional survey forecasts for the United States, we document the behavior of the entire term structure of expectations for output growth, inflation, and the...