This article shows that the "risk premium" shock in Smets and Wouters (2007) can be interpreted as a structural shock to the demand for safe and liquid assets such as short-term US Treasury securities. Several implications of this interpretation are discussed

This paper examines the degree of fragmentation in the Euro overnight unsecured money market during the period June 2008-August 2013 using interbank loans constructed from payments data. After controlling for cross-country differences in bank risk, we document several episodes of significant...

An unanticipated tightening of monetary policy increases option implied volatility in equity and bond markets. At the same time, realized volatility declines over the period corresponding to the increase in option implied volatility. The result is a decrease in the volatility swap return,...

Central banks in emerging and developing economies (EMDEs) have been modernizing their monetary policy frameworks, often moving toward inflation targeting (IT). However, questions regarding the strength of monetary policy transmission from interest rates to inflation and output have often...

This document contains material that supplements our manuscript, entitled Latent Semantic Analysis of the FOMC Statements, which is scheduled to appear in the Review of Accounting and Finance. Specifically, it provides two lengthy appendices (Appendix A and Appendix B) that are mentioned in the...

We estimate a medium-scale DSGE model, including a financial accelerator and the search and matching framework in labor markets, for the Korean economy, using the Bayesian technique. The estimated model shows that the recent sluggishness in GDP growth can be explained by slow technology growth,...

I argue that countries' dollar-denominated net external debt (dollar debt) helps explain the large differences in risk premia across currencies and how U.S. monetary policy affects the global economy. When the U.S. dollar strengthens, the real value of dollar debt increases, weakening the...

This paper explores the nature of macroeconomic spillovers from advanced economies to emerging market economies (EMEs) and the consequences for independent use of monetary policy in EMEs. We first empirically document the effects of US monetary policy shocks on a sample group of EMEs. A...

A large literature measures the effects of monetary policy shocks on asset prices. We promote a data-driven approach to designating monetary surprises via econometric tests for asset price jumps. Applying these tests, we identify the specific Fed communications that generate surprises....

We present an incomplete markets model to understand the costs and benefits of increasing government debt when an increased demand for safety pushes the natural rate of interest below zero. A higher demand for safe assets causes the ZLB to bind, increasing unemployment. Higher government debt...