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...

This paper examines the impact of a permanent shock to the productivity growth rate in a New Keynesian model when the central bank does not immediately adjust its policy rule to that shock. Our results show that inflation and productivity growth are negatively correlated at business cycle...

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...

So, according to Irving Fisher, one reason to worry about deflation is that the federal funds rate is expected to be held near zero as the economy grows out of this recession.

Fluctuations in the price of motor fuel (mainly gasoline) have caused most of the monthly noise and year-over-year fluctuations of headline CPI inflation over the past four years.

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...

Manufacturing jobs as a percentage of private employment has fallen by half—from about 21 percent in 1987 to less than 11 percent today. Yet, manufacturing output as a percentage of private output is cyclical with a fairly flat trend averaging about 14 percent.

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...