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Working Paper
Another hidden cost of incentives: the detrimental effect on norm enforcement

Monetary incentives are often considered as a way to foster contributions to public goods in society and firms. This paper investigates experimentally the effect of monetary incentives in the presence of a norm enforcement mechanism. Norm enforcement through peer punishment has been shown to be effective in raising contributions by itself. We test whether and how monetary incentives interact with punishment and how this in turn affects contributions. Our main findings are that free riders are punished less harshly in the treatment with incentives, and as a consequence, average contributions ...
Working Papers , Paper 09-2

Working Paper
Duration dependence in monetary policy: international evidence

We study the duration of monetary regimes in a simple neo-classical Phillips curve model. The model is an extension of Owyang (2001) and Owyang and Ramey (2001). In this paper, we consider the role of the duration of inflationary regimes on the average inflation rate in an international cross-section. We find that inflationary regimes in certain countries are duration dependent but anti-inflationary regimes are not. In addition, we find that countries with high central banker turnover switch from inflationary to anti-inflationary with lower probability.
Working Papers , Paper 2002-021

Working Paper
Reconsidering the Fed’s Forecasting Advantage

Previous studies show the Fed has a forecast advantage over the private sector, either because it devotes more resources to forecasting or because it has an informational advantage in knowing the path of future monetary policy. We evaluate the Fed’s forecast advantage to determine how much of it results from the Fed’s knowledge of the conditioning path. We develop two tests—an instrumental variable encompassing test and a path-dependent encompassing test—to equalize the Fed’s information set with the private sector’s. We find that, generally, the Fed does not encompass the private ...
Working Papers , Paper 2022-001

Working Paper
Modeling Volcker as a non-absorbing state: agnostic identification of a Markov-switching VAR

Recently, models of monetary policy have been constructed to include structural breaks to account for changes in policymaker preferences or operating procedures. These models typically assume that when changes occur, they happen once and for all. In this paper, we allow the policymaker and the economy to switch freely between regimes. We find that not only does the nature and effect of innovations to monetary policy change, but switching the policy rule and the economy's subsequent response can in and of itself alter the path of the economy. We find the switch itself can generate ...
Working Papers , Paper 2002-018

Working Paper
Structural breaks and regional disparities in the transmission of monetary policy

Using a regional VAR, we find large differences in the effects of monetary policy shocks across regions of the United States. We also find that the region-level effects of monetary policy differ a great deal between the pre-Volcker and Volcker-Greenspan periods in terms of their depth and length. The two sample periods also yield very different rankings of the regions in terms of the effects of monetary policy. Our regional VAR also suggests that aggregate VARs that ignore regional variations can suffer from severe aggregation bias. We use the results of our regional VAR to find evidence that ...
Working Papers , Paper 2003-008

Working Paper
Perfectual signaling with imperfectly correlated costs

Working Papers , Paper 92-8

Working Paper
Ricardian equivalence under income uncertainty

Working Papers , Paper 92-6

Working Paper
Accounting for racial wealth disparities in the United States

Using data from the Survey of Consumer Finances, this paper updates and extends previous research on the racial wealth gap in the United States. We explore several hypotheses that help explain differential wealth accumulation by racial groups, including the importance of receiving inheritances and other financial support from relatives and the conditions in local real estate markets. By exploring the disparities among white, black, and Hispanic families, we make new contributions to the literature. We find that observable factors account for the entire wealth gap between white and Hispanic ...
Working Papers , Paper 19-13

Working Paper
Does Fed policy reveal a ternary mandate?

This paper examines the role of financial instability in setting monetary policy. The paper begins with a model that examines the interaction of monetary and regulatory policy. It then empirically tests whether financial instability has affected monetary policy. One important innovation is to construct a measure of financial instability directly related to the FOMC financial instability concerns expressed in FOMC meeting transcripts. We find that, even after controlling for forecasts of inflation and unemployment, the word counts of terms related to financial instability do correlate with ...
Working Papers , Paper 16-11

Working Paper
Raising the Inflation Target: How Much Extra Room Does It Really Give?

Some, but less than intended. The reason is a shift in the behavior of the private sector: Prices adjust more frequently, lowering the potency of monetary policy. We quantitatively investigate this channel across different models, based on a calibration using micro data. By raising the target from 2 percent to 4 percent, the monetary authority gets only between 0.51 and 1.60 percentage points of effective extra policy room for monetary policy (not 2 percentage points as intended). Getting 2 percentage points of effective extra room requires raising the target to more than 4 percent. Taking ...
Working Papers , Paper 20-16

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