In this paper, we develop a structural model to estimate the current level of the natural rate for a small open economy, featuring a rich set of shocks to provide economic intuition for its underlying drivers. The model follows the New Keynesian tradition with several frictions and is able to...

This paper studies whether the observed high correlation between monetary policy in the U.S. and the Euro area can be explained by economic fundamentals, i.e. by macroeconomic interdependence between the two regions. We show that an optimal monetary policy reaction function for the ECB that...

Does the Taylor rule prescribe negative interest rates for 2009-2011? This question is important because negative prescribed interest rates provide a justification for quantitative easing once actual policy rates hit the zero lower bound. We answer the question by analyzing Fed policy following...

By making use of a dynamic model, this paper examines the effectiveness of the interest rate policy to control inflation. The model utilized in this paper considers both demand and supply side effects of interest rate. These effects are used to derive the relevant impulse response functions and...

What the market thinks is most likely to occur is not necessarily what the market expects to occur. This note explains why most of the surveys of federal funds rate outlook deviate substantially from the true market expectation, especially as the forecast horizon increases. Surveys often ask...

In this article, time-series models are developed to represent three alternative, potential monetary policy regimes as monetary policy returns to normal. The first regime is a return to the high and volatile inflation rate of the 1970s. The second regime, the one expected by most Federal Reserve...

As the Federal Reserve continues to normalize its monetary policy, this paper studies the impact of U.S. interest rates on rates in other countries. We find a modest but nontrivial pass-through from U.S. to domestic short-term interest rates on average. We show that, to a large extent, this...

This paper analyzes the monetary policy framework in Kazakhstan. The authorities have been successful in containing inflation in the context of a managed exchange rate regime. Over the past two years, the central bank has taken steps to enhance its ability to regulate liquidity in the financial...

This paper analyzes the relationship between bank lending and the Federal Reserve's policy of paying interest on excess reserves (IOER). We argue that the Fed's IOER policy deviates from the standard interest-rate floor framework in ways that influence banks' incentives to hold loans and...

This paper examines the uniqueness and learnability of rational expectations equilibrium when the policy rate is occasionally pegged at the zero lower bound (ZLB). We consider a model that features recurring, transient ZLB regimes and compare various interest rate rules which respond to...