The altered allocations of money market volatility obtained by alternative monetary policy procedures are illustrated by stochastic simulations of a staff monthly model.The results indicate the nature of the tradeoff between short-run volatility in the money stock and in the funds rate that is...

This paper introduces an empirical measure of the cost of allocating money market volatility between the money stock and the Federal funds rate, the principal purpose being to devise a framework for data-based measures of the short-run implied by alternative operating procedures

This paper explores the specification and use of uncertainty measures in constructions of policy forecasts of money market activity. The concept of a policy forecast implies efforts not only to explicitly condition forecasts on assumptions regarding short-run operating procedures but also to...

Indexes of asset prices have been suggested as nominal anchors for monetary policy, in place of conventional monetary aggregates. This paper explores issues in modeling and policy simulations of expectations models of auction prices. Long-run (cointegrating) and short-run relationships are...

A standard theoretical assumption of present-value models of asset prices is that agents' expectations of future inflation are embedded in auction prices, such as primary commodity prices and the term structure of interest rates. The aim of this paper is to provide an empirical assessment of the...

The optimal control literature traditionally analyzes linear-quadratic Gaussian (LQG) formulations of macroeconomic policy design where policy planers seek to minimize the distance between a direct target vector y and a vector of aspiration levels y*, using a suitably dimensioned matrix M as a...

The three pillars of econometric modeling are: (1) the reduced form, (2) the recursive form, and (3) the structural form. Each of these techniques exists for the purpose of revealing the joint conditional probability distributions of current and lagged endogenous variables conditional on the...

This paper explores alternatives to the narrow measure of the money stock M1 as potential target guidelines for short- and intermediate-run policy. Using stochastic simulations of the Federal Reserve Board quarterly model that mimic the outcomes of a variety of intermediate targeting policies, a...

In a Ramsey policy regime, heterogeneity in beliefs about the potential costs of climate change is shown to produce policy ambiguities that alter carbon prices and taxation. Three sources of ambiguity are considered: (i) the private sector is skeptical, with beliefs that are unknown to the...