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Author:Foerster, Andrew 

Journal Article
Have Lags in Monetary Policy Transmission Shortened?

The Federal Open Market Committee’s monetary policy has expanded beyond changing the federal funds rate to include forward guidance and balance sheet policy. Using these tools may shorten lags in monetary policy transmitting to inflation. Using a proxy funds rate that incorporates tightening from these additional policy tools, we find evidence of a shorter lag in policy transmission to inflation since 2009, though with high associated uncertainty.
Economic Bulletin , Issue December 21, 2022 , Pages 3

Journal Article
Sudden Stops and COVID-19: Lessons from Mexico’s History

The COVID-19 pandemic produced a sharp contraction in capital flows in emerging markets during the spring of 2020. Such contractions are known as “sudden stops” and historically have been associated with significant downturns in a country’s economic activity. Evidence from Mexico’s financial crisis history suggests that sudden stops tend to exhibit a common pattern: the crisis lasts one to two years before a rapid but partial recovery, followed by years of protracted stagnation.
FRBSF Economic Letter , Volume 2020 , Issue 33 , Pages 01-05

Working Paper
Communicating Monetary Policy Rules

Despite the ubiquity of inflation targeting, central banks communicate their frameworks in a variety of ways. No central bank explicitly expresses their conduct via a policy rule, which contrasts with models of policy. Central banks often connect theory with their practice by publishing inflation forecasts that can, in principle, implicitly convey their reaction function. We return to this central idea to show how a central bank can achieve the gains of a rule-based policy without publicly stating a specific rule. The approach requires central banks to specify an inflation target, inflation ...
Working Paper Series , Paper 2021-12

Working Paper
Aggregate Implications of Changing Sectoral Trends

We find disparate trend variation in TFP and labor growth across major U.S. production sectors over the post-WWII period. When aggregated, these sector-specific trends imply secular declines in the growth rate of aggregate labor and TFP. We embed this sectoral trend variation into a dynamic multi-sector framework in which materials and capital used in each sector are produced by other sectors. The presence of capital induces important network effects from production linkages that amplify the consequences of changing sectoral trends on GDP growth. Thus, in some sectors, changes in TFP and ...
Working Paper , Paper 19-11

Journal Article
The Effects of Permanent and Transitory Shocks under Imperfect Information

We study an economic environment affected by shocks that may be either permanent or transitory in nature. Contrary to the standard perfect information setup, we assume that households cannot distinguish between the two types of shocks. We describe how to solve the model under this imperfect information assumption in the context of the one-sector neoclassical model. We show that the solution involves a recasting of the driving process in terms of estimates of the exogenous states and forecast errors made by households rather than the states themselves. Given observations on the driving ...
Economic Quarterly , Issue 2Q , Pages 41-59

Journal Article
Expectations of large-scale asset purchases

During and after the recent financial crisis, the Federal Reserve turned to a number of unconventional tools to bolster the economy. The effectiveness of one such tool, large-scale asset purchases (LSAPs)?often referred to as quantitative easing?has been hard to measure. ; Efforts to estimate LSAP impact have often relied on an "event study" approach, focusing on short time intervals around the announcements of new LSAP programs. But these studies typically ignore the fact that financial market participants sometimes expect a given LSAP announcement in advance?and such expectations can ...
Economic Review , Issue Q II , Pages 5-29

Journal Article
Monetary Policy Stance Is Tighter than Federal Funds Rate

The Federal Reserve’s use of forward guidance and balance sheet policy means that monetary policy consists of more than changing the federal funds rate target. A proxy federal funds rate that incorporates data from financial markets can help assess the broader stance of monetary policy. This proxy measure shows that, since late 2021, monetary policy has been substantially tighter than the federal funds rate indicates. Tightening financial conditions are similar to what would be expected if the funds rate had exceeded 5¼% by September 2022.
FRBSF Economic Letter , Volume 2022 , Issue 30 , Pages 5

Working Paper
Perturbation methods for Markov-switching DSGE models

This paper develops a general perturbation methodology for constructing high-order approximations to the solutions of Markov-switching DSGE models. We introduce an important and practical idea of partitioning the Markov-switching parameter space so that a steady state is well defined. With this definition, we show that the problem of finding an approximation of any order can be reduced to solving a system of quadratic equations. We propose using the theory of Grobner bases in searching all the solutions to the quadratic system. This approach allows us to obtain all the approximations and ...
FRB Atlanta Working Paper , Paper 2013-01

Journal Article
Why Is the Fed’s Balance Sheet Still So Big?

The Federal Reserve?s balance sheet is significantly larger today than it was before the financial crisis of 2008?2009. Rising demand for currency due to greater economic activity is partly responsible for this increase. The balance sheet will also need to remain large because the Federal Reserve now implements monetary policy in a regime of ample reserves, using a different set of tools than in the past to achieve its interest rate target.
FRBSF Economic Letter

Briefing
Anatomy of a Pandemic Recovery Across Sectors and Regions

Many have highlighted the disproportionate effect of the COVID-19 pandemic on certain sectors of the economy. The Bureau of Labor Statistics publishes data on employment by sector and state, which can show the fall and recovery in employment over the past two years at a disaggregated level. We find that just four of 10 sectors account for 75 percent of the fall in total employment during the pandemic. State-sector pairings with more dramatic falls in employment tended to see faster recoveries to compensate, indicating these job losses were often temporary separations. We also find evidence ...
Richmond Fed Economic Brief , Volume 21 , Issue 40

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