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Speech
What the Moment Demands
Mary C. Daly, President and Chief Executive Officer, Federal Reserve Bank of San Francisco, 33rd Frankfurt European Banking Congress, Frankfurt, Germany, November 17, 2023, 3:30 PM CET (local), 6:30 AM PST
Working Paper
Monetary Policy Uncertainty and Economic Fluctuations at the Zero Lower Bound
We propose a TVP-VAR with stochastic volatility for the unemployment rate, core inflation and the federal funds rate augmented with survey-based interest rate expectations and uncertainty and a FAVAR with a wider set of observable variables and alternative monetary policy measures in order to explore U.S. monetary policy, accounting for the zero lower bound. We find that a rise in monetary policy uncertainty increases unemployment and lowers core inflation; the effects on unemployment in particular are robust (a gradual 0.4 percentage point increase), lasting more than two years after the ...
Working Paper
Monetary policy expectations and economic fluctuations at the zero lower bound
We propose a recursive VAR model augmented with survey-based measures of future interest rates to identify the effects of forward guidance on the U.S. economy. Our results show that when interest rates are away from the zero lower bound (ZLB), an exogenous shift in the perception toward higher future interest rates leads to an increase in current economic activity. However, when policy rates fall to the ZLB, economic activity decreases following an upward revision to expected future interest rates. These findings are robust to alternative estimation frameworks, identification schemes and data ...
Journal Article
What the Moment Demands
When central banks are unsure about how the economy will evolve, what impact their policies will have, or how fundamental benchmarks in the economy are changing, the optimal strategy is a gradualist approach to policy. The challenge will be to respond rapidly when the situation requires and to resist the pressure to act quickly when patience is needed. The following is adapted from the closing keynote by the president of the Federal Reserve Bank of San Francisco to the 33rd Frankfurt European Banking Congress in Frankfurt, Germany, on November 17.