'Normal' monetary policy in words and deeds: remarks at Columbia University, School of International and Public Affairs, New York City
Remarks at Columbia University, School of International and Public Affairs, New York City.
Comments on “A Skeptical View of the Impact of the Fed’s Balance Sheet”: remarks at the 2018 U.S. Monetary Policy Forum, New York City
Remarks at the 2018 U.S. Monetary Policy Forum, New York City.
Implementing monetary policy with the balance sheet: keynote remarks for ECB Workshop: Money Markets, Monetary Policy Implementation, and Central Bank Balance Sheets, Frankfurt am Main, Germany
Keynote Remarks for ECB Workshop: Money Markets, Monetary Policy Implementation, and Central Bank Balance Sheets, Frankfurt am Main, Germany.
The effectiveness of nonstandard monetary policy measures: evidence from survey data
We assess the perception of professional forecasters regarding the effectiveness of unconventional monetary policy measures announced by the U.S. Federal Reserve after the collapse of Lehman Brothers. Using survey data collected at the individual level, we analyze the change in forecasts of Treasury and corporate bond yields around the announcement dates of nonstandard monetary policy measures. We find that professional forecasters expect bond yields to drop significantly for at least one year after the announcement of accommodative policies.
An interest rate rule to uniquely implement the optimal equilibrium in a liquidity trap
We propose a new interest rate rule that implements the optimal equilibrium and eliminates all indeterminacy in a canonical New Keynesian model in which the zero lower bound on nominal interest rates (ZLB) is binding. The rule commits to zero nominal interest rates for a length of time that increases in proportion to how much past inflation has deviated?either upward or downward?from its optimal level. Once outside the ZLB, interest rates follow a standard Taylor rule. Following the Taylor principle outside the ZLB is neither necessary nor sufficient to ensure uniqueness of equilibria. ...
The effects of policy guidance on perceptions of the Fed’s reaction function
In the past few years, the Federal Open Market Committee (FOMC) has been using forward guidance about the federal funds rate in a more explicit way than ever before. This paper explores the market reaction to the forward guidance, with particular focus on the use of calendar dates and economic thresholds in the FOMC statement. The results show that market participants interpreted the FOMC?s policy guidance as conveying important information about the Committee?s policy reaction function. In particular, market participants came to expect the FOMC to wait for lower levels of unemployment for a ...
Understanding Heterogeneous Agent New Keynesian Models: Insights from a PRANK
In recent years there has been a lot of interest in the effect of income inequality (heterogeneity) on the economy, from both academics and policymakers. Researchers have developed Heterogeneous Agent New Keynesian (HANK) models that incorporate heterogeneity and uninsurable idiosyncratic risk into the New Keynesian models that have become a cornerstone of monetary policy analysis. This research has argued that heterogeneity and idiosyncratic risk change many features of New Keynesian models – the transmission of conventional monetary policy, the forward guidance puzzle, fiscal multipliers, ...
Moving toward 'normal' U.S. monetary policy: remarks at the Joint Bank Indonesia-Federal Reserve Bank of New York Central Banking Forum, Nusa Dua, Indonesia
Remarks at the Joint Bank Indonesia-Federal Reserve Bank of New York Central Banking Forum, Nusa Dua, Indonesia.
Remarks at the 42nd Annual Central Banking Seminar, Federal Reserve Bank of New York, New York City
Remarks at the 42nd Annual Central Banking Seminar, Federal Reserve Bank of New York, New York City.
How to escape a liquidity trap with interest rate rules
I study how central banks should communicate monetary policy in liquidity trap scenarios in which the zero lower bound on nominal interest rates is binding. Using a standard New Keynesian model, I argue that the key to anchoring expectations and preventing self-fulfilling deflationary spirals is to promise to keep nominal interest rates pegged at zero for a length of time that depends on the state of the economy. I derive necessary and sufficient conditions for this type of state-contingent forward guidance to implement the welfare-maximizing equilibrium as a globally determinate (that is, ...