It has been nearly twenty years since Poole (1970) wrote his classic article on the optimal choice of monetary policy instruments in a stochastic IS-LM model. Poole assumed that the monetary authority (henceforth called the Fed) can control the interest rate or the money supply exactly. These...

We apply a discrete choice approach to model the empirical behavior of the Federal Reserve in changing the federal funds target rate, the benchmark of short term market interest rates in the US. Our methods allow the explanatory variables to be nonstationary as well as stationary. This feature...

The dynamic response of aggregate variables to shocks is one of the central concerns of applied macroeconomics. The main measurement procedure for these dynamics consists of estimmiating an ARMA or VAR (VARs, for short). In non- or semi-structural approaches, the characterization of dynamics...

This paper examines various interest rate rules, as well as policies derived by solving optimal control problems, for their ability to dampen economic fluctuations caused by random shocks. A tax rate rule is also considered. A multicountry econometric model is used for the experiments. The...

One role of monetary policy is to coordinate expectations in the economy and greater transparency of monetary policy may lead to greater coordination. But if transparent

The paper analyzes the question why the U.S. economy in the 2000:4-2004:3 period was sluggish in light of the large expansionary fiscal and monetary policies that took place. The answer does not appear to be that there were large structural changes in the economy or systematic bad shocks. This...

This paper looks at a broad array of evidence concerning the recent boom in home prices, and considers what this means for future home prices and the economy. It does not appear possible to explain the boom in terms of fundamentals such as rents or construction costs. A psychological theory,...