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Journal Article
Understanding deflation
This Economic Letter examines the distinct features of deflation, discusses why it is a matter of concern to the public and to policymakers in general, and looks at the recent experience of the inflation and deflation in the U.S. and other countries.
Journal Article
Interest rates and monetary policy: conference summary
This Economic Letter summarizes the papers presented at a conference on "Interest Rates and Monetary Policy" held at the Federal Reserve Bank of San Francisco on March 19 and 20, 2004, under the joint sponsorship of the Federal Reserve Bank of San Francisco and the Stanford Institute for Economic Policy Research. The papers are listed at the end and are available at http://www.frbsf.org/economics/conferences/0403/index.html
Journal Article
Two measures of employment: how different are they?
Since the end of the 2001 recession, the U.S. economy has performed pretty well in terms of output growth, averaging about 3-1/4 percent a year. But how well has the economy performed in terms of creating jobs? To answer that question, most analysts look at two independent monthly estimates of employment published by the Bureau of Labor Statistics (BLS). And the problem is that each sends a different signal about recent labor market conditions. The so-called payroll survey has been reporting a substantial loss in employment and a slow recovery of labor market conditions, while the so-called ...
Journal Article
What makes the yield curve move?
Journal Article
Estimating the \\"neutral\\" real interest rate in real time
On September 20, the Federal Open Market Committee, the nation's monetary policymaking body, raised its target level of the federal funds rate by 25 basis points, the eleventh straight increase over the last fifteen months. The statement released immediately after the meeting said, "With underlying inflation expected to be contained, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured. Nonetheless, the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability." ; The statement ...
Working Paper
Monetary policy and the slope factor in empirical term structure estimations
This paper examines the empirical relationship between the movement of the slope factor in term structure of nominal interest rates and exogenous monetary-policy shocks in the U.S. after 1982. Using first a six-variable VAR model and then a GMM estimation model of the "Taylor rule," I estimate the exogenous monetary-policy shocks implied by each of them in the U.S. during this period. Meanwhile, a two-factor model is used to extract the underlying slope factor of the term structure. Results from the correlation study suggest that there is strong correlation between the slope factor and the ...
Journal Article
Macroeconomic models for monetary policy
This Economic Letter summarizes the papers presented at the conference "Macroeconomic Models for Monetary Policy" held at the Federal Reserve Bank of San Francisco on March 1-2, 2002, under the joint sponsorship of the Federal Reserve Bank of San Francisco and the Stanford Institute for Economic Policy Research
Journal Article
The Term Auction Facility’s effectiveness in the financial crisis of 2007–09
During the global financial crisis of 2007-2009, financial markets experienced tremendous strains, and the cost of short-term funding rose sharply. In response, several central banks around the world created new lending facilities to quickly provide liquidity to the banking sector and improve market functioning. The list includes the European Central Bank, Bank of England, Bank of Canada and Swiss National Bank. On Dec. 12, 2007, the Federal Reserve established its version?the term auction facility (TAF). ; Researchers have yet to reach a consensus on the effectiveness of such facilities. ...
Working Paper
Macro factors and the affine term structure of interest rates
I formulate an affine term structure model of bond yields from a general equilibrium business-cycle model, with observable macro state variables of the structural economy as the factors. The factor representing monetary policy is strongly mean-reverting, and its influence on the term structure is primarily through changing the slope of the yield curve. The factor representing technology is more persistent, and it affects the term structure by shifting the level of the yield curve. The dynamic implications of the model for the macro economy and the term structure are consistent with the broad ...
Journal Article
Do oil futures prices help predict future oil prices?
The price of oil has risen by about 60% since mid-2004 and by more than 40% since the beginning of 2005. Though the U.S. economy has apparently absorbed this supply shock well so far, the path of future oil prices remains a concern for monetary policymakers. Higher oil prices can damp demand, as consumers and firms spend more of their budgets on oil-related products and less on other goods and services. Furthermore, if higher oil prices are passed through to a significant extent to other goods and services and ultimately wages, inflationary pressures can build. ; Is the price of oil likely to ...