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Journal Article
Technological Change and Central Banking
The decentralized autonomous organization (DAO) represents a radically new way to manage databases. Since money and payments are all about managing databases and since banks play a central role in money and payments, DAO-based money and payments systems are potentially a disruptive force in the banking system—which includes central banks. One would normally expect regulatory frameworks to evolve with a changing technological landscape. However, the decentralized governance structure characteristic of DAOs renders it near impossible to regulate these entities directly—a property that makes ...
Journal Article
Fiscal multipliers in war and in peace
Proponents of fiscal stimulus argue that government spending is needed to replace the private spending normally lost during a recession. Estimates of the so-called fiscal multiplier based on wartime episodes are used to support the proposition that a peacetime intervention can "stimulate" the economy in a desirable manner. The author argues that a wartime crisis is fundamentally different from a peacetime economic crisis. What may be desirable in war is not necessarily so in peace. This is demonstrated formally in the context of a simple neoclassical model, which delivers fiscal ...
Journal Article
A Model of U.S. Monetary Policy Before and After the Great Recession
The author studies a simple dynamic general equilibrium monetary model to interpret key macroeconomic developments in the U.S. economy both before and after the Great Recession. In normal times, when the Federal Reserve?s policy rate is above the interest paid on reserves, countercyclical monetary policy works in a textbook manner. When a shock drives the policy rate to the zero lower bound, the economy enters a liquidity-trap scenario in which open market purchases of government securities have no real or nominal effects, apart from expanding the supply of excess reserves in the banking ...
Journal Article
Does the Yield Curve Really Forecast Recession?
An inverted yield curve doesn?t forecast recession; it forecasts conditions that make recession more likely.
Hot Money Credits to Kick-Start a Stalled Economy?
Stimulus checks that must be spent within a certain amount of time could help trigger spending if the economy continues to stall.
Report
Many moving parts: a look inside the U.S. labor market
Essay from the 2010 Annual Report.
Working Paper
Monetary policy regimes and beliefs
Revised. This paper investigates the role of beliefs over monetary policy in propagating the effects of monetary policy shocks within the context of a dynamic, stochastic general equilibrium model. In this model, monetary policy periodically switches between low- and high-money-growth regimes. When individuals cannot observe the regime directly, they must draw inferences over regime type based on historical money growth rates. The authors show that for an empirically plausible money growth process, beliefs evolve slowly in the wake of a regime change. As a result, their model is able to ...
Discussion Paper
Monetary policy regimes and beliefs
Recent monetary history has been characterized by monetary authorities that appear to shift periodically between distinct policy regimes associated with higher or lower average rates of money creation. As policy regimes are not directly observable and as the rate of monetary expansion varies for reasons other than regime changes, the general public must form beliefs over current monetary policy based on historical realizations of money growth rates. Depending on the parameters governing the behaviour of monetary policy, beliefs (and therefore inflation forecasts) may evolve very slowly in ...
Working Paper
Money, Banking and Financial Markets
The fact that money, banking, and financial markets interact in important ways seems self-evident. The theoretical nature of this interaction, however, has not been fully explored. To this end, we integrate the Diamond (1997) model of banking and financial markets with the Lagos and Wright (2005) dynamic model of monetary exchange?a union that bears a framework in which fractional reserve banks emerge in equilibrium, where bank assets are funded with liabilities made demandable in government money, where the terms of bank deposit contracts are affected by the liquidity insurance available in ...