If current projections of future budget surpluses materialize, investing in Treasury securities?an asset class with which investors have long been familiar?could eventually become a thing of the past. In this paper, I examine the extent to which investors' portfolio allocation decisions are...

I examine pre-announcement and news effects on the stock market in the context of public disclosure of monetary policy decisions. The results suggest that the stock market tends to be relatively quiet - conditional volatility is abnormally low - on days preceding regularly scheduled policy...

As recently as early 1994, market participants had to infer the stance of U.S. monetary policy according to the type and size of the open market operations conducted by the Federal Reserve's Trading Desk. Thus, investors were exposed to uncertainty about both the timing and the motivation for...

The macroeconomic costs of disinflation are considered for the United States in a rational expectations macroeconometric model with sticky prices and imperfect information regarding monetary policy objectives. The analysis centers on simulation experiments using the Board’s new quarterly...

This paper introduces a model-based measure of the equilibrium federal funds rate and examines the indicator properties of the spread between observed and equilibrium rates. The results are compared to those of existing studies, which implicitly use long-term interest rates to proxy the...

Motivated by issues raised in both the finance and economics literatures, I construct a dynamic general equilibrium model where agents use differing degrees of sophistication when forecasting future economic conditions. All agents solve standard dynamic optimization problems and face strategic...

I analyze the business cycle implications of noisy economic indicators in the context of a dynamic general equilibrium model. Two main results emerge. First, measurement error in preliminary data releases can have a quantitatively important effect on economic fluctuations. For instance, under...

Credit default swaps (CDS) are the most common type of credit derivative. This paper provides a brief history of the CDS market and discusses its main characteristics. After describing the basic mechanics of a CDS, I present a simple valuation framework that focuses on the relationship between...

One strategy for disinflation prescribes a deliberate path towards low inflation. A contrasting opportunistic approach eschews deliberate action and instead waits for unforeseen shocks to reduce inflation. This paper compares the ability of these two approaches to achieve disinflation---and at...