After the onset of the Great Recession in 2008 the Federal Reserve engaged in very expansionary monetary policy, which resulted in near zero interest rates on short-term securities. This policy, together with record fiscal deficits, failed to restore full employment as historic experiences would...

The small decline in the value of mortgage-related assets relative to the large total losses associated with the financial crisis suggests the presence of financial amplification mechanisms, which allow relatively small shocks to propagate through the financial system. We review the literature...

Tiny changes in the American monetary policy can have dramatic effects on the rest of the world because of dollar's double role of national and international currency. This is the Triffin dilemma. The paper shows how it works through three examples: price of commodities, dollarization, and the...

U.S. debt ceiling crises in 2011 and 2013 were marked by significant outflows from money market funds (MMFs). This study evaluates the behavior and motivations of investors redeeming from MMFs during these crises. We find that the majority of redemptions reflect a generalized flight-to-liquidity...

In November 2008, the Federal Reserve announced the first of a series of unconventional monetary policies, which would include asset purchases and forward guidance, to reduce long-term interest rates. We investigate the behavior of shorts, considered sophisticated investors, before and after a...

This paper presents an interest group theory of central bank independence. The theory is grounded in the concept of rent extraction. In the absence of an independent central bank, politicians can benefit in the short run by creating an unanticipated burst of inflation that unravels many interest...

This paper considers a central puzzle of central bank independence: why politicians would agree to establish such a bank, when the consequence is giving up a substantial degree of control over the money supply and price levels. I suggest that politicians agree to establish independent central...