The menu-cost interpretation of sticky prices implies that the probability of a price change should depend on the past history of prices and fundamentals only through the gap between the current price and the frictionless price. We find that this prediction is broadly consistent with the...

A recent paper by Bernanke, Gertler, and Watson (1997) suggests that monetary policy could be used to eliminate any recessionary consequences of an oil price shock. This paper challenges this conclusion on two grounds. First, we question whether the Federal Reserve actually has the power to...

This paper revisits the yield spread's usefulness for predicting future real GDP growth. We show that the contribution of the spread can be decomposed into the effect of expected future changes in short rates and the effect of the term premium. We find that both factors are relevant for...

This paper reports overwhelming evidence against the hypothesis that the federal funds rate follows a martingale over the two-week reserve maintenance period, establishing that banks do not regard reserves held on different days of the week to be perfect substitutes. A theoretical model of the...

The authors find that the composite leading index (CLI) is useful for forecasting gross national product (GNP), both in sample and in an out-of-sample real-time exercise. They propose a nonlinear specification in which cyclical shifts of the CLI precede those in GNP. However, the authors find...

Futures prices were well above spot prices for most commodities during most of the Great Depression; evidently the spectacular declines in agricultural prices caught many people by surprise. Based on the historical correlations between commodity prices and consumer prices, commodity markets...

The value of the dollar appears to move in one direction for long periods of time. The authors develop a new statistical model of exchange rate dynamics as a sequence of stochastic, segmented time trends. They reject the null hypothesis that exchange rates follow a random walk in favor of their...