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Journal Article
Credit Market Frictions, Business Cycles, and Monetary Policy: The Research Contributions of Charles Carlstrom and Timothy Fuerst
Charles Carlstrom and Timothy Fuerst were prolific and prominent research economists who, until their untimely deaths a few years ago, were long-associated with the Federal Reserve Bank of Cleveland. Their myriad contributions include the incorporation of financial market imperfections into macroeconomic models and the study of optimal monetary policy. We provide an overview of their work and summarize a few key themes from a research conference held in their honor.
Working Paper
Living Up to Expectations: The Effectiveness of Forward Guidance and Inflation Dynamics Post-Global Financial Crisis
This paper studies the effectiveness of forward guidance when central banks face private agents with heterogeneous expectations allowing for a degree of bounded rationality. Exploiting unique survey-based measures of expected inflation, output growth and interest rates, we estimate a small-scale New Keynesian model with forward guidance shocks for the United States and the other G7 countries plus Spain. We find that the share of fully-informed rational expectations (FIRE) agents in aggregate expectations is similar for the U.S., the U.K., Germany and other major advanced economies (albeit far ...
Working Paper
Living Up to Expectations: Central Bank Credibility, the Effectiveness of Forward Guidance and Inflation Dynamics Post-Global Financial Crisis
This paper studies the effectiveness of forward guidance when central banks have imperfect credibility. Exploiting unique survey-based measures of expected inflation, output growth and interest rates, we estimate a small-scale New Keynesian model for the United States and other G7 countries plus Spain allowing for deviations from full information rational expectations. In our model, the key parameter that aggregates heterogeneous expectations captures the central bank's credibility and affects the overall effectiveness of forward guidance. We find that the central banks of the U.S., the U.K., ...