Refet Gürkaynak, Brian Sack, and Eric Swanson (2005) provide empirical evidence that long forward nominal rates are overly sensitive to monetary policy shocks, and that this is consistent with a model where long-term inflation expectations are not anchored because agents must infer the central...

This paper estimates a New Keynesian model to draw inferences about the behavior of the Federal Reserve's unobserved inflation target. The results indicate that the target rose from 1-1/4 percent in 1959 to over 8 percent in the mid-to-late 1970s before falling back below 2-1/2 percent in 2004....

We propose a novel framework to gauge the credibility of central banks' commitment to an inflation-targeting regime. Our framework combines survey data on macroeconomic forecasts with high-frequency financial market data to understand how inflation targeting makes economic agents change their...

This paper analyzes optimal monetary policy under precommitment in a state-dependent pricing (SDP) environment. Under SDP, monopolistically competitive firms are allowed to endogenously change the timing of price adjustments. I show that this endogenous timing of price adjustment alters the...

Would a more open and regular evaluation of the monetary policy framework improve policy in the United States? Even when considering a relatively short timeframe that spans the 1960s to the present, it is possible to point to many significant changes to the framework. Some of the changes were...

The frequencies at which prices and wages are adjusted, interpreted as price and wage flexibility, are key elements in workhorse models used for policy analysis. Yet, there is little evidence regarding the relationship between these two sources of nominal rigidities. Using two large and highly...

The remarkable stability of low domestic inflation in many countries requires explanation. In this paper, a number of competing hypotheses are evaluated on a stand-alone basis, and all are found to be inadequate. This includes the view that this outcome has been solely the result of more...

This paper studies the effects of three financial shocks in the economy: a net-worth shock, an uncertainty or risk shock, and a credit-spread shock. We argue that only the latter can push the nominal interest rate against its zero lower bound. Further, a recessionary shock to the net worth or...

In this study, we measure the central bank independence for all fourteen ESCWA countries using two indicators: the legal independence and accountability measure (the de jure measure) and the turnover rates of central bank governors (the de facto measure). The entire sample of countries is split...

We study how changes in the steady-state real interest rate affect the optimal inflation target in a New Keynesian DSGE model with trend inflation and a lower bound on the nominal interest rate. In this setup, a lower steady-state real interest rate increases the probability of hitting the lower...