This paper examines the stimulative effect of central bank forward guidance—the promise to keep future policy rates lower than its policy rule suggests—when the short-term nominal interest rate is stuck at its zero lower bound (ZLB).We utilize a standard New Keynesian model in which forward...

This article documents the massive increase in trading in commodity derivatives over the past decade—growth which far outstrips the growth in commodity production and the need for derivatives to hedge risk by commercial producers and users of commodities. During the past decade, many...

This article presents global solutions to standard New Keynesian models to show how economic dynamics change when the nominal interest rate is constrained at its zero lower bound (ZLB). We focus on the canonical New Keynesian model without capital, but we also study the model with capital, with...

We use a dynamic stochastic general equilibrium model to address two questions about U.S. monetary policy: 1) Can monetary policy elevate output when it is below potential? and 2) Is the zero lower bound a trap? The model answer to the first question is yes it can, but the effect is only...

This article uses a DSGE framework to evaluate the role of monetary policy in determining the likelihood of encountering the zero lower bound. We find that the probability of experiencing episodes of being at zero lower bound depends almost exclusively on the monetary policy rule. A policy rule,...

For over a decade, academic and industry economists argued that the negative correlation between returns on stocks and commodity futures was evidence that institutional investors should add commodity futures index funds as an asset class in their portfolio management strategies. Does this...

In this paper we ask whether or not recent explosive growth in commodity derivative trading, both over the counter and on organized exchanges, represents a new us of these derivatives as an asset class to exploit a previously unrecognized hedge for business cycle risk as claimed by Gorton and...

This paper analyzes the effect of energy price shocks on business cycle fluctuations in a model with monetary policy and a tax code. The tax code includes a tax on realized nominal capital gains. When the monetary regime allows energy price shocks to affect long run inflation expectations, oil...