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Journal Article
More money: understanding recent changes in the monetary base
The financial crisis that began in the summer of 2007 took a turn for the worse in September 2008. Until then, Federal Reserve actions taken to improve the functioning financial markets did not affect the monetary base. The unusual lending and purchase of private debt was offset by the sale of Treasury securities so that the total size of the balance sheet of the Fed remained relatively unchanged. In September, however, the Fed stopped selling securities as it made massive purchases of private debt and issued hundreds of billions of dollars in short-term loans. The result was a doubling of ...
Journal Article
Editor's introduction
We have been wrestling with one of the most severe recessions in the post-World War II era; moreover, it has been accompanied by a widespread financial crisis. After unprecedented policy responses, there are signs of recovery on both fronts. So, it is not too early to take stock of our actions and attempt to learn lessons from our recent past - lessons for monetary policy, financial regulation, and other aspects of the crisis. My objective here is to focus on lessons for monetary policy alone and leave discussion of regulatory issues and financial markets for another day.
Journal Article
Recent trends in homeownership
The homeownership rate began to trend upward in 1995 after years of being relatively constant, near 64 percent. This article describes recent changes in the share of U.S. housing that is owner-occupied and explores the reasons for the surprising rise over the past decade. Explanations that have been offered include demographics, low mortgage rates, changes in housing policy, and innovations in the mortgage financial market. Of all these explanations, the most plausible one is that innovations in the financial markets increased access to mortgage finance, mainly by reducing downpayment ...
Journal Article
The reserve market and the information content of M1 announcements
An analysis of the effect that monetary control arrangements have on the information content of the money stock announcements in the market for bank reserves.
Journal Article
Monetary policy and commodity futures
This paper constructs daily measures of the real interest rate and expected inflation using commodity futures prices and the term structure of Treasury yields. We find that commodity futures markets respond to surprise increases in the federal funds rate target by raising the inflation rate expected over the next 3 to 9 months. There is no evidence that the real interest rate responds to surprises in the federal funds target. The data from the commodity futures markets are highly volatile; we show that one can substantially reduce the noise using limited information estimators such as the ...
Journal Article
What should a central bank look like?
To figure out what a central bank should look like, consider that most have three features in common: independence, transparency and a goal of low and stable inflation.
Journal Article
Movin' On Up
More young people, poor people and minorities are buying homes these days, but not because of tax deductions or government affordable-housing programs.
Journal Article
What explains the growth in commodity derivatives?
This article documents the massive increase in trading in commodity derivatives over the past decade?growth which far outstrips the growth in commodity production and the need for derivatives to hedge risk by commercial producers and users of commodities. During the past decade, many institutional portfolio managers added commodity derivatives as an asset class to their portfolios. This addition was part of a larger shift in portfolio strategy away from traditional equity investment and toward derivatives based on assets such as real estate and commodities. Institutional investors? use of ...
Working Paper
Evaluating FOMC forecasts
Federal Reserve policymakers began reporting their economic forecasts to Congress in 1979. These forecasts are important because they indicate what the Federal Open Market Committee (FOMC) members think will be the likely consequence of their policies. We evaluate the accuracy of the FOMC forecasts relative to private sector forecasts, the forecasts of the Research Staff at the Board of Governors, and a nave alternative forecast. The Fed reports both the range (high and low) of the individual policymaker's forecasts and a truncated central tendency. We find no reason to consider the truncated ...
Journal Article
The ups and downs of inflation and the role of Fed credibility
This look at interest rates and inflation in the U.S. over the past 50 years helps to clarify ideas about the Fed?s monetary policy and its own credibility. The authors examine three periods corresponding to three different policies: when the Fed operated without credibility, when it was earning credibility and when it was operating with credibility.