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The Great Escape? A Quantitative Evaluation of the Fed’s Liquidity Facilities

Del Negro, Marco; Eggertsson, Gauti B.; Ferrero, Andrea; … - 2011

We introduce liquidity frictions into an otherwise standard DSGE model with nominal and real rigidities, explicitly … incorporating the zero bound on the short-term nominal interest rate. Within this framework, we ask: Can a shock to the liquidity of … government exchanges liquid government assets for illiquid private paper? We find that the effects of the liquidity shock can be …

Persistent link: https://www.econbiz.de/10014176860

Central Bank Transparency and Nonlinear Learning Dynamics

Eusepi, Stefano - 2008

Central bank communication plays an important role in shaping market participants' expectations. This paper studies a simple nonlinear model of monetary policy in which agents have incomplete information about the economic environment. It shows that agents' learning and the dynamics of the...

Persistent link: https://www.econbiz.de/10014214926

The Advantage of Flexible Targeting Rules

Ferrero, Andrea - 2008

This paper investigates the consequences of debt stabilization for inflation targeting. If the monetary authority perfectly stabilizes inflation while the fiscal authority holds constant the real value of debt at maturity, the equilibrium dynamics might be indeterminate. However, determinacy can...

Persistent link: https://www.econbiz.de/10014215842

Optimal Monetary Policy Under Sudden Stops

Cúrdia, Vasco - 2010

Emerging market economies often face sudden stops in capital inflows or reduced access to the international capital market, a development that can cause serious disruptions in economic activity. This paper analyzes what monetary policy can accomplish in such an event. Optimal monetary policy...

Persistent link: https://www.econbiz.de/10014218833

Can U.S. Monetary Policy Fall (Again) into an Expectation Trap?

Armenter, Roc; Bodenstein, Martin - 2006

We provide a tractable model to study monetary policy under discretion. We restrict our analysis to Markov equilibria. We find that for all parametrizations with an equilibrium inflation rate of about 2 percent, there is a second equilibrium with an inflation rate just above 10 percent. Thus,...

Persistent link: https://www.econbiz.de/10014061211

Optimal Monetary Policy and Economic Growth

Bhattacharya, Joydeep; Haslag, Joseph; Martin, Antoine - 2010

This paper studies an overlapping generations economy with capital where limited communication and stochastic relocation create an endogenous transactions role for fiat money. We assume a production function with a knowledge externality (Romer-style) that nests economies with endogenous growth...

Persistent link: https://www.econbiz.de/10014061534

Central Bank Transparency, the Accuracy of Professional Forecasts, and Interest Rate Volatility

Middeldorp, Menno H. - 2011

Central banks worldwide have become more transparent. An important reason is that democratic societies expect more openness from public institutions. Policymakers also see transparency as a way to improve the predictability of monetary policy, thereby lowering interest rate volatility and...

Persistent link: https://www.econbiz.de/10013124570

FOMC Communication Policy and the Accuracy of Fed Funds Futures

Middeldorp, Menno H. - 2011

Over the last two decades, the Federal Open Market Committee (FOMC), the rate-setting body of the United States Federal Reserve System, has become increasingly communicative and transparent. According to policymakers, one of the goals of this shift has been to improve monetary policy...

Persistent link: https://www.econbiz.de/10013126070

Central Bank Transparency and the Crowding Out of Private Information in an Experimental Asset Market

Middeldorp, Menno H. - 2011

Central banks have become increasingly communicative. An important reason is that democratic societies expect more transparency from public institutions. Central bankers, based on empirical research, also believe that sharing information has economic benefits. Communication is seen as a way to...

Persistent link: https://www.econbiz.de/10013128675

How 'Unconventional' are Large-Scale Asset Purchases? The Impact of Monetary Policy on Asset Prices

Rosa, Carlo - 2012

This paper examines the impact of large-scale asset purchases (LSAP) on U.S. asset prices (nominal and inflation-indexed bonds, stocks, and U.S. dollar spot exchange rates) using an event study with intraday data. The surprise component of LSAP announcements is identified from Financial Times...

Persistent link: https://www.econbiz.de/10013106884