In this paper, we re-examine the relationship between money and interest rates with a focus on the past few years, when the opportunity cost of M2 has dropped below zero. Until the late 1980s, a stable relationship between monetary aggregates and the opportunity cost of holding money -- measured...

I develop empirical models of the U.S. economy that distinguish between the aggregate demand effects of short- and long-term interest rates-one with clear "microfoundations" and one more loosely motivated. These models are estimated using government and private long-term bond yields. Estimation...

In this study, we analyze the reaction of the U.S. Treasury bond market to innovations in macroeconomic fundamentals. We identify these innovations based on macroeconomic news, which are defined as differences between the actual releases and market expectations. We find that that macroeconomic...

Using only daily data on bond and stock returns, we identify and characterize flight to safety (FTS) episodes for 23 countries. On average, FTS days comprise less than 3% of the sample, and bond returns exceed equity returns by 2.5 to 4%. The majority of FTS events are country-specific not...

Treasury securities normally possess unparalleled safety and liquidity and, consequently, carry a money premium. We use recent debt limit impasses, which temporarily increased the riskiness of Treasuries, to investigate the relationship between the money premium, safety, and liquidity. Our...

Using positions data on bond futures, I document that speculators' spread trades contain private information about future economic activities and asset prices. Strong steepening trades are associated with negative payroll surprises in subsequent months and can predict asset markets' reaction to...

It has been documented that an increase in the demand for safe assets induces the private sector to create more money-like claims. Focusing on private repos backed by U.S. Treasury securities, I show that an increase in the demand for safe assets leads to a decreases in the issuance of Treasury...

This paper develops a theoretical model of trading in the federal funds market that captures characteristics of discount window borrowing and the federal funds market during the first year of the financial crisis, including the narrowing of the spread between the discount rate and the target...

We examine the dynamics of eleven different deposit rates for a panel of over 2,500 branches of about 900 depository institutions observed weekly over ten years. We replicate previous work showing that rates are downwards-flexible and upwards-sticky, and show that a simple menu cost model can...

To combat the financial crisis that intensified in the fall of 2008, the Federal Reserve injected a substantial amount of liquidity into the banking system. The resulting increase in reserve balances exerted downward price pressure in the federal funds market, and the effective federal funds...