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Working Paper
The relative price effects of monetary shocks
We document the response of the individual components of the Producer Price Index (PPI) to commonly used measures of monetary shocks, and show that these responses are at variance with many widely-used ?macro? models of monetary non-neutrality. Monetary shocks are shown to have large relative price effects, resulting in an increase in the dispersion of the cross-section distribution of prices. Furthermore, in response to a contractionary (expansionary) monetary shock, a substantial number of prices tend to rise (fall). Most of the existing models of monetary nonneutrality are not capable of ...
Journal Article
The federal funds rate as an indicator of monetary policy: evidence from the 1980s
Recently, several economists have argued that movements in the federal funds rate are a good proxy for changes in monetary policy. In this article, Nathan Balke and Kenneth Emery critically examine this view and the evidence supporting it. Using simple vector autoregressions, they find that before 1980 the correlations between the federal funds rate and other important macroeconomic variables are consistent with a traditional monetary policy interpretation of the federal funds rate. However, they show that after 1982 the relationships between the federal funds rate and other macroeconomic ...
Working Paper
Asymmetric information and the role of FED watching
Working Paper
Are deep recessions followed by strong recoveries?
Working Paper
The algebra of price stability
Working Paper
Oil price shocks and U.S. economic activity: an international perspective
Oil price shocks are thought to have played a prominent role in U.S. economic activity. In this paper, we employ Bayesian methods with a dynamic stochastic general equilibrium model of world economic activity to identify the various sources of oil price shocks and economic fluctuation and to assess their effects on U.S. economic activity. We find that changes in oil prices are best understood as endogenous. Oil price shocks in the 1970s and early 1980s and the 2000s reflect differing mixes of shifts in oil supply and demand, and differing sources of oil price shocks have differing effects on ...
Working Paper
Oil price shocks and the U.S. economy: where does the asymmetry originate?
Rising oil prices appear to retard aggregate U.S. economic activity by more than falling oil prices stimulate it. Past research suggests adjustment costs and/or monetary policy may be possible explanations ofthe asymmetric response. This paper uses a quasi-vector autoregressive model of U. S. economy to examine from where the asymmetry might originate. The analysis uses counterfactual impulse response experiments to detennine that monetary policy alone cannot account for the asymmetry. The robustness ofshort-lived asymmetry across the base case and counterfactuals is consistent with the ...
Working Paper
An international perspective on oil price shocks and U.S. economic activity
The effect of oil price shocks on U.S. economic activity seems to have changed since the mid-1990s. A variety of explanations have been offered for the seeming change?including better luck, the reduced energy intensity of the U.S. economy, a more flexible economy, more experience with oil price shocks and better monetary policy. These explanations point to a weakening of the relationship between oil prices shocks and economic activity rather than the fundamentally different response that may be evident since the mid-1990s.> ; Using a dynamic stochastic general equilibrium model of world ...
Journal Article
Inflation and monetary restraint: too little, too late?
Working Paper
The algebra of price stability