In recent years, there has been renewed interest in the moments of the yield curve (or alternatively, the term spread) as a predictor of future economic activity, defined as either recessions, or industrial production growth. In this paper, we re-examine the evidence for this predictor for the...

We show long-term Treasury convenience yields are more sensitive to changes in Treasury supply than short-term Treasury convenience yields. The fiscal expansion in the past two decades and the resultant increase in Treasury supply depressed convenience yields heterogeneously across maturities --...

Monetary policy transmits through broad financial conditions--interest rates, asset prices, credit spreads and exchange rates--rather than through the policy rate alone. Yet current frameworks remain anchored around r*, the neutral interest rate. We introduce FCI*, the neutral level of financial...

Inspired by the Silicon Valley Bank run and building on Diamond- Dybvig (1993), we develop a model in which asset price fluctuations can trigger bank runs. Liquidation amounts to selling assets at their market price. Depositors can buy and hold the assets after paying an idiosyncratic cost. We...

We develop a dynamic macroeconomic model in which the secular decline in real interest rates arises endogenously from rising wealth inequality. Challenging the standard "safe asset shortage" hypothesis, the model shows how falling real rates can coexist with a stable safe asset ratio--closely...

This paper revisits the relationship between federal debt and interest rates, which is a key input for assessments of fiscal sustainability. Estimating this relationship is challenging due to confounding effects from business cycle dynamics and changes in monetary policy. A common approach is to...

Sovereign debt yields have declined dramatically over the last half-century. Standard explanations, including aging populations and increases in asset demand from abroad, encounter difficulties when confronted with the full range of evidence. We propose an explanation based on a decline in...

Central banks often face tradeoffs in how their monetary policy decisions impact economic activity (including employment), inflation and the price level. This paper assesses how these tradeoffs have evolved over time and varied across countries, with a focus on understanding the post-pandemic...

This paper shows the key, yet overlooked, role played by the legacy of a high inflation history on the strength of the monetary policy response to inflationary shocks. To rationalize this, we propose a New Keynesian model that diverges from the existing workhorse model by adding path-dependence...

This paper shows that there is more scope for a borrower to engage in a sustainable infinite debt rollover (a "Ponzi scheme") when interest/growth rates are stochastic. In this context, I prove that the relevant "r vs. g" comparison uses the yield r_{long} to an infinite-maturity zero-coupon...