Search Results
Journal Article
Interest rate spreads as indicators for monetary policy
Working Paper
Some evidence on the efficacy of the UK inflation targeting regime: an out-of-sample forecast approach
Inflation targeting (IT)--a policy framework that directly targets an explicit inflation goal--has gained widespread attention recently as it has been adopted by several OECD countries. There is a growing body of literature on the ultimate long-term benefits of price stability and on theoretical issues related to inflation targeting. But the short duration of this practice has limited the number of works that empirically analyze the performance of IT regimes. This paper examines the British inflation targeting experience since 1993 by focusing on the out-of-sample forecast performance of ...
Working Paper
Regime switching in the dynamic relationship between the federal funds rate and innovations in nonborrowed reserves
This paper examines the dynamic relationship between changes in the funds rate and nonborrowed reserves within a reduced form framework that allows the relationship to have two distinct patterns over time. A regime switching model a la Hamilton (1989) is estimated. On average, CPI inflation has been significantly higher in the regime characterized by large and volatile changes in funds rate. Innovations in money growth are associated with a strong anticipated inflation effect in this high inflation regime, and a moderate liquidity effect in the low inflation regime. Furthermore, an identical ...
Journal Article
Federal Reserve credibility and inflation scares
We develop a simple, quantitative model of the U.S. economy to demonstrate how an "inflation scare " may occur when the Federal Reserve lacks full credibility. In particular, we show that the long-term nominal interest rate may undergo a sudden increase if an adverse movement in the inflation rate triggers a deterioration in the public's beliefs about the Federal Reserve's commitment to maintaining low inflation in the future. We find that simulations from our model capture some observed patterns of U.S. interest rates in the 1980s.
Journal Article
Have recessions become shorter?
Journal Article
Measuring the cost of \\"financial repression\\"
Working Paper
Expectations, credibility, and disinflation in a small macroeconomic model
We use a version of the Fuhrer-Moore model to study the effects of expectations and central bank credibility on the economy's dynamic transition path during a disinflation. Simulations are compared under four different specifications of the model that vary according to the way that expectations are formed (rations versus adaptive) and the degree of central bank credibility (full versus partial). In general, the various specifications exhibit qualitatively similar behavior and can reasonably approximate the trend movements in U.S. macro variables during the Volcker disinflation of the early ...
Journal Article
Export competition and contagious currency crises
Journal Article
Political business cycles