Search Results
Speech
Monetary policy strategies for a low-neutral-interest-rate world: remarks at the 80th Plenary Meeting of the Group of Thirty, Federal Reserve Bank of New York, New York City
Remarks at the 80th Plenary Meeting of the Group of Thirty, Federal Reserve Bank of New York, New York City.
Speech
The Theory of Average Inflation Targeting
Remarks at Bank of Israel/CEPR Conference on “Inflation: Dynamics, Expectations, and Targeting” (delivered via videoconference).
Working Paper
The Reversal Interest Rate
The reversal interest rate is the rate at which accommodative monetary policy reverses andbecomes contractionary for lending. We theoretically demonstrate its existence in a macroeconomic model featuring imperfectly competitive banks that face financial frictions. When interest rates are cut too low, further monetary stimulus cuts into banks’ profit margins, depressing their net worth and curtailing their credit supply. Similarly, when interest rates are low for too long, the persistent drag on bank profitability eventually outweighs banks’ initial capital gains, also stifling credit ...
Report
Tying down the anchor: monetary policy rules and the lower bound on interest rates
This paper uses a standard New Keynesian model to analyze the effects and implementation of various monetary policy frameworks in the presence of a low natural rate of interest and a lower bound on interest rates. Under a standard inflation-targeting approach, inflation expectations will be anchored at a level below the inflation target, which in turn exacerbates the deleterious effects of the lower bound on the economy. Two key themes emerge from our analysis. First, the central bank can eliminate this problem of a downward bias in inflation expectations by following an average-inflation ...
Report
Macroeconomic Drivers and the Pricing of Uncertainty, Inflation, and Bonds
The correlation between uncertainty shocks, as measured by changes in the VIX, and changes in breakeven inflation rates declined and turned negative after the Great Recession. This estimated time-varying correlation is shown to be consistent with the predictions of a standard New Keynesian model with a lower bound on interest rates and a trend decline in the natural rate of interest. In one equilibrium of the model, higher uncertainty raises the probability of large shocks that leave the central bank constrained by the lower bound and unable to offset negative shocks. Resulting inflation ...