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Working Paper
The Energy Boom and Manufacturing in the United States
This paper examines the response of U.S. manufacturers to changes in competitiveness brought about by movements in the price of natural gas. I estimate the response of various measures of manufacturing activity using panel regression methods across roughly 80 industries that allow each industry's response to vary with its energy intensity. These estimates suggest that the fall in the price of natural gas since 2006 is associated with a 2 to 3 percent increase in activity for the entire manufacturing sector, with much larger effects of 30 percent or more for the most energy intensive ...
Journal Article
FOMC communications and the predictability of near-term policy decisions
In February 1994, the FOMC began a new era in transparency, gradually building a communications apparatus that conveys information about the Committee?s decisions and expectations. Has the new apparatus improved the public?s ability to predict FOMC interest rate decisions? New research based on the prices of fed funds futures shows that over the past decade, it has, especially over horizons of two to three months.
Working Paper
Alternative approaches to real exchange rates and real interest rates: three up and three down
This paper examines the relationship between real exchange rates and real interest rates using three different approaches across four currencies and two horizons with 20 years of data. Each approach gives some encouragement that this relationship might hold, but each approach also encounters problems establishing the form or usefulness of the relationship. On balance, this paper contributes to the literature by finding more encouraging results than in earlier studies, but it still remains to be demonstrated that the real exchange rate-real interest rate relationship is the linchpin to ...
Working Paper
Recovering market expectations of FOMC rate changes with options on federal funds futures
This paper demonstrates how options on federal funds futures, which began trading in March 2003, can be used to recover the implied probability density function (PDF) for future Federal Open Market Committee (FOMC) interest rate outcomes. The discrete nature of the choices made by the FOMC allows for a very straightforward recovery of the implied PDF using ordinary least squares (OLS) estimation. This simple recovery method stands in contrast to the relatively complicated PDF recovery techniques developed for options written on assets such as equities, foreign exchange, or commodity futures ...
Working Paper
Option prices, exchange market intervention, and the higher moment expectations channel: a user’s guide
A vast literature on the effects of sterilized intervention by the monetary authorities in the foreign exchange markets concludes that intervention systematically moves the spot exchange rate only if it is publicly announced, coordinated across countries, and consistent with the underlying stance of fiscal and monetary policy. Over the past fifteen years, researchers have also attempted to determine if intervention has any effects on the dispersion and directionality of market views concerning the future exchange rate. These studies usually focus on the variance around the expected future ...
Working Paper
War and peace: recovering the market's probability distribution of crude oil futures prices during the Gulf crisis
This paper investigates the market's expectations for oil prices during the Persian Gulf crisis. To do so a general method for using options markets to recover the implied distribution for futures prices is developed. The method applies to a wide class of distributions. In particular, it is not limited to those distributions arising from diffusion or jump-diffusion processes.
Journal Article
U.S. international transactions in 1987
Discussion Paper
The Energy Boom and Manufacturing in the United States: A First Look
Over the past eight years, the production of both crude oil and natural gas has increased sharply in the United States.
Working Paper
Estimating pass-through: structure and stability
This paper estimates the pass-through relationship between exchange rates and import prices for the United States using recursive techniques across a variety of specifications to examine structural and coefficient stability in a systematic fashion. Results of estimations: 1) indicate that pass-through at the macroeconomic level is a complicated amalgamation of disparate industrial structures that involves more than one long-run equilibrium relationship between the variables of interest, and 2) call into question the prevailing wisdom that foreign firms changed their pricing behavior in light ...
Working Paper
Using options prices to infer PDF'S for asset prices: an application to oil prices during the Gulf crisis
We develop a general method to infer martingale equivalent probability density functions (PDFs) for asset prices using American options prices. The early exercise feature of American options precludes expressing the option price in terms of the PDF of the price of the underlying asset. We derive tight bounds for the option price in terms of the PDF and demonstrate how these bounds, together with observed option prices, can be used to estimate the parameters of the PDF. We infer the distribution for the price of crude oil during the Persian Gulf crisis and find the distribution differs ...