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Yang Han · Jun Ma

This paper proposes a shadow rate no-arbitrage dynamic term structure model (SDTSM) with drifting trends to estimate the long-run trend of the real interest rate using yield curve data from the U.S., …

Thomas J. Sargent · Neil Wallace

This paper studies, within a simple "ad hoc" macroeconomic model not derived from individuals' and firms' optimizing behavior but built to resemble the macroeconometric models of the time, how the …

Pierre-Olivier Gourinchas · Walker Ray · Dimitri Vayanos

The paper develops a two-country preferred-habitat model in which currency and bond markets are populated by different investor clienteles — currency traders with price-elastic demand for foreign …

Jonathan Payne · Bálint Szőke · George Hall · Thomas J Sargent

This paper constructs a new dataset of US federal bond prices and uses it to estimate the full term structure of yields on gold-denominated US federal debt from 1791 to 1933 — the entire gold standard …

John H. Cochrane

Cochrane argues that the standard new-Keynesian account of how a Taylor rule pins down inflation is incomplete -- it works only by assuming the government will follow policies that amount to a threat …

Ming Zeng · Guihai Zhao

What drives the joint historical dynamics of the term structure of equity yields and nominal bond yields — and can a single unified equilibrium model explain the procyclical equity yield slope, the …

John B. Taylor

Building a simple rational-expectations model of the federal funds market -- a lagged Trading Desk "reaction function" for the supply of Fed balances combined with a demand for balances that depends …

Hanno Lustig · Christopher Sleet · Şevin Yeltekin

Solving a Ramsey model of optimal fiscal and monetary policy in which the government can finance itself only with non-contingent nominal bonds of various maturities, this paper finds that optimal …

Jeffrey C. Fuhrer

Standard optimising consumption models make spending jump on impact when a shock hits, which the data flatly contradict; replacing time-separable utility with habit formation gives consumers a motive …

Daniel Barth · R. Jay Kahn

The U.S. Treasury market is the deepest and most liquid fixed-income market in the world, yet in March 2020 it experienced unprecedented dysfunction—widening bid-ask spreads, skyrocketing repo rates, …

Carlos Arteta · Steven Kamin · Franz U. Ruch

This paper examines how the effects of rising U.S. interest rates on emerging market and developing economies (EMDEs) depend on the underlying source of the interest rate increase. Specifically, it …

Marvin Goodfriend

Using the 30-year bond rate as a real-time signal of the public's long-run inflation expectations, this narrative study of Fed federal funds rate policy from 1979 to 1992 argues that the central …

Fernando Alvarez · Robert E. Lucas · Warren E. Weber

Reconciling the consensus view that raising short rates fights inflation with the quantity-theoretic evidence that inflation and interest rates move together with money growth in the long run, this …

Maximilian Grimm · Òscar Jordà · Moritz Schularick · Alan M. Taylor

This paper provides the first long-run causal evidence that a persistently loose stance of monetary policy — defined as extended periods of low interest rates relative to the neutral rate — …

Greg Kaplan · Benjamin Moll · Giovanni L. Violante

This paper builds a two-asset Heterogeneous Agent New Keynesian (HANK) model matching the empirical joint distribution of income, liquid, and illiquid wealth, and finds that the indirect effect of an …

Richard Clarida · Jordi Galí · Mark Gertler

Estimating a forward-looking Federal Reserve policy rule separately for 1960-79 and 1979-96, this paper finds that the Fed let real short-term rates fall as expected inflation rose before Volcker, but …

Kenneth N. Kuttner

This 2001 Journal of Monetary Economics paper by Kenneth N. Kuttner addresses a basic errors-in-variables problem in earlier event studies of monetary policy and interest rates (notably Cook and Hahn …

Luis G. Hernández-Román

This paper employs a proxy structural VAR model to examine the effects of global supply chain (GSC) shocks on U.S. macroeconomic variables and the Federal Reserve's historical response, and evaluates …

Apostolos Serletis · Libo Xu

Measuring the welfare cost of inflation requires specifying a money demand function, a definition of money, and an approach to consumer surplus; existing estimates vary widely because these choices …

Árpád Ábrahám · Eva Carceles-Poveda · Yan Liu · Ramon Marimon

This paper asks how to optimally design a Financial Stability Fund (Fund) for a union of sovereign countries that must simultaneously (i) prevent sovereign default, (ii) provide risk-sharing and …

Sebastian Di Tella

This paper builds a flexible-price model in which money's liquidity premium keeps real interest rates from falling when idiosyncratic risk rises, so money reduces investment rather than stabilizing …

Tom D. Holden

The paper proposes and analyzes real rate rules — monetary policy rules of the form i_t = r_t + φπ_t (φ > 1), where r_t is the current-period real interest rate observed via TIPS yields or inflation …

Juan J Cruces · Christoph Trebesch

The first present-value estimates of creditor losses for all 180 sovereign debt restructurings with foreign banks and bondholders between 1978 and 2010 -- average haircut 37%, with half the cases …

Masazumi Hattori · Tomohide Mineyama · Jouchi Nakajima

The paper addresses a fundamental limitation of the standard Taylor rule as a monetary policy stance gauge: the rule is defined solely for the overnight federal funds rate (FFR) and cannot assess …

Glenn D. Rudebusch

Estimated Taylor-type policy rules typically find the Fed adjusts the funds rate only 20-30 percent of the way to its desired level each quarter, widely read as deliberate "interest rate smoothing" -- …

Alan J. Auerbach · Maurice Obstfeld

Auerbach and Obstfeld argue that even if money and bonds are perfect substitutes at a zero short-term nominal interest rate -- the textbook reason open-market operations are said to be powerless in a …

Arvind Krishnamurthy · Annette Vissing-Jorgensen

This 2011 Brookings Papers on Economic Activity paper by Arvind Krishnamurthy and Annette Vissing-Jorgensen evaluates the effect of the Federal Reserve's large-scale purchases of long-term Treasuries …

John H. Cochrane · Monika Piazzesi

This 2002 American Economic Review Papers and Proceedings essay by John Cochrane and Monika Piazzesi proposes a high-frequency alternative to monthly-VAR identification of monetary policy shocks, …

Stefania D'Amico · William English · David López-Salido · Edward Nelson

This 2012 Economic Journal paper estimates how the Federal Reserve's large-scale asset purchase programmes of 2008-2011 lowered longer-term US Treasury yields, disaggregating the total effect within a …

Joseph Gagnon · Matthew Raskin · Julie Remache · Brian Sack

This 2011 International Journal of Central Banking paper by Gagnon, Raskin, Remache, and Sack provides the founding empirical assessment of the Federal Reserve's first large-scale asset purchase …

Selva Demiralp · Òscar Jordà

Demiralp and Jorda argue that since the Fed began publicly announcing its Federal funds rate target in 1994, it has manipulated short-term rates through a Pavlovian "announcement effect" -- moral …

John H. Cochrane

Using band-pass spectral filters on weekly U.S. data from the Federal Reserve's 1979-82 nonborrowed-reserve-targeting period, Cochrane finds a negative short-run correlation between money growth and …

Refet S. Gürkaynak · Brian Sack · Eric Swanson

This 2005 American Economic Review paper by Refet Gürkaynak, Brian Sack, and Eric Swanson asks whether long-term forward interest rates respond to daily macroeconomic and monetary-policy news, a …

Robert E. Lucas, Jr.

Using quarterly U.S. money, price, and interest-rate data smoothed with a two-sided exponentially weighted moving-average filter, Lucas shows that once high-frequency "business cycle" noise is …