Conventional and Unconventional Monetary Policy with Endogenous Collateral Constraints

By Aloísio Araújo, Susan Schommer, and Michael Woodford

American Economic Journal: Macroeconomics, January 2015

We consider the effects of central bank purchases of a risky asset as an additional dimension of policy alongside "conventional" interest rate policy in a general-equilibrium model of asset pricing with endogenous collateral constraints. The effects of as...

Is the Phillips Curve Alive and Well after All? Inflation Expectations and the Missing Disinflation

By Olivier Coibion and Yuriy Gorodnichenko

American Economic Journal: Macroeconomics, January 2015

We evaluate explanations for the absence of disinflation during the Great Recession and find popular explanations to be insufficient. We propose a new explanation for this puzzle within the context of a standard Phillips curve. If firms' inflation expecta...

The Possible Unemployment Cost of Average Inflation below a Credible Target

By Lars E. O. Svensson

American Economic Journal: Macroeconomics, January 2015

If inflation expectations become firmly anchored at the inflation target even when average inflation deviates from the target, the long-run Phillips curve becomes nonvertical. During 1997-2011, average inflation expectations in Sweden have been close to t...

Bitcoin: Economics, Technology, and Governance

By Rainer Böhme, Nicolas Christin, Benjamin Edelman, and Tyler Moore

Journal of Economic Perspectives, Spring 2015

Bitcoin is an online communication protocol that facilitates the use of a virtual currency, including electronic payments. Bitcoin's rules were designed by engineers with no apparent influence from lawyers or regulators. Bitcoin is built on a transaction ...

FOMC Forward Guidance and Investor Beliefs

By Arunima Sinha

American Economic Review, May 2015

This paper considers the effect of different dimensions of the FOMC's forward guidance on ex ante investor expectations about future changes in US Treasury yields. Options and Futures data for 2- and 10-year Treasuries is used to extract State-Price Densi...

Rewriting Monetary Policy 101: What's the Fed's Preferred Post-Crisis Approach to Raising Interest Rates?

By Jane E. Ihrig, Ellen E. Meade, and Gretchen C. Weinbach

Journal of Economic Perspectives, Fall 2015

For many years prior to the global financial crisis, the Federal Open Market Committee set a target for the federal funds rate and achieved that target through small purchases and sales of securities in the open market. In the aftermath of the finan...

The Response of Tail Risk Perceptions to Unconventional Monetary Policy

By Masazumi Hattori, Andreas Schrimpf, and Vladyslav Sushko

American Economic Journal: Macroeconomics, April 2016

We examine the impact of unconventional monetary policy (UMP) on stock market tail risk and risks of extreme interest rate movements. We find that UMP announcements substantially reduced option-implied equity market tail risks and interest rate risks. Mo...

Monetary Policy, Financial Stability, and the Zero Lower Bound

By Stanley Fischer

American Economic Review, May 2016

Much has happened in the world of central banking in the past decade. In this paper, I focus on three issues associated with the zero lower bound (ZLB) on short-term nominal interest rates and the nexus between monetary policy and financial stability: 1) ...

Interbank Markets and Banking Crises: New Evidence on the Establishment and Impact of the Federal Reserve

By Mark Carlson and David C. Wheelock

American Economic Review, May 2016

This paper examines the impact of the Federal Reserve's founding on seasonal pressures and contagion risk in the interbank system. Deposit flows among classes of banks were highly seasonal before 1914; amplitude and timing varied regionally. Panics interr...

Bank Leverage and Regulatory Regimes: Evidence from the Great Depression and Great Recession

By Christoffer Koch, Gary Richardson, and Patrick Van Horn

American Economic Review, May 2016

In the boom before the Great Depression, capital requirements for commercial banks were low and fixed. Bankers faced double liability. Failing banks were not bailed out. During the boom before the Great Recession, capital requirements were proportional to...

How Credible Is the Federal Reserve? A Structural Estimation of Policy Re-optimizations

By Davide Debortoli and Aeimit Lakdawala

American Economic Journal: Macroeconomics, July 2016

The paper proposes a new measure of the degree of credibility of the Federal Reserve. We estimate a medium-scale macroeconomic model, where the central bank has access to a commitment technology, but where a regime-switching process governs occasional re-...

Review of Making Money: Coin, Currency, and the Coming of Capitalism by Christine Desan

By William Roberds

Journal of Economic Literature, September 2016

In the eighteenth century, the Bank of England revolutionized money through its large-scale introduction of circulating banknotes. The consequences of this revolution are felt even today. In Making Money: Coin, Currency, and the Coming of Capitalism

Current Federal Reserve Policy under the Lens of Economic History: A Review Essay

By Stephen D. Williamson

Journal of Economic Literature, September 2016

This review essay reviews the volume edited by Owen Humpage, Current Federal Reserve Policy under the Lens of Economic History: Essays to Commemorate the Federal Reserve System’s Centennial, and provides a broader perspective on central-banking i...

The Great Recession: A Self-Fulfilling Global Panic

By Philippe Bacchetta and Eric van Wincoop

American Economic Journal: Macroeconomics, October 2016

While the 2008-2009 financial crisis originated in the United States, output, consumption, and investment declined by similar magnitudes around the globe. Given the partial integration of both goods and financial markets, what can account for the remarkab...