We find that anomaly returns are generally unchanged during FOMC days, though a small group of anomalies may have substantial changes. But if they do, their changes exacerbate pricing errors. Hence, our evidence challenges existing studies that find that the CAPM performs better over the FOMC...

For a long time now, the monetary policy in the US and other industrialized countries has been a regime of cheap money with the interest rate often being negative. A low interest rate in the framework of the Keynesian monetary policy stimulates demand but is hard on the retirees who are mostly...

The paper addresses the empirical application of cointegration analysis to four important macroeconomic variables: narrow money (M1), incomes, prices and interest rates in the U.S. during the turmoil period of last decade. Unit root and longmemory tests support the appropriateness of the...

A two-sector general equilibrium banking model is constructed to study the functioning of a floor system of central bank intervention. Only retail banks can hold reserves, and these banks are also subject to a capital requirement, which creates “balance sheet costs�? of holding reserves. An...

We investigate the effects of U.S. monetary policy shocks from two alternative policy indicators for a modern sample encompassing 1988-2020. The choice of the Wu and Xia (2016) shadow federal funds rate leads to persistent price puzzles. These puzzles arise despite inclusion of the usual suspect...

Benhabib, Schmitt-Grohe, and Uribe (2003) argue that if you relied solely on local analysis you would be led to believe that aggressive, backward-looking interest rate rules are sufficient for determinacy. But from the perspective of global analysis, backward-looking rules do not guarantee...

This paper analyzes the restrictions necessary to ensure that the interest rate policy rule used by the central bank does not introduce local real indeterminacy into the economy. It conducts the analysis in a Calvo-style sticky price model. A key innovation is to add investment spending to the...

Nominal GDP (NGDP) targeting has received a lot of attention over the past decade. This note provides a brief review of the key arguments for NGDP targeting and then presents some practical ways to use it in the conduct of U.S. monetary policy. Specifically, this note shows how to construct...

We discuss the evolution in macroeconomic thought on the monetary policy transmission mechanism and present related empirical evidence. The core channels of policy transmission — the neoclassical links between short-term policy interest rates, other asset prices such as long-term interest...

Lucas (1972) is the pathbreaking analysis of the neutrality and temporary non-neutrality of money. But our central banks set interest rate targets, and do not even pretend to control money supplies. How is inflation determined under an interest rate target? We finally have a complete theory of...