Interventions by the Federal Reserve during the financial crisis of 2007-2009 were generally viewed as unprecedented and in violation of the rules—notably Bagehot's rule—that a central bank should follow to avoid the time-inconsistency problem and moral hazard. Reviewing the evidence for...

In recent years, a number of central banks have announced numerical inflation targets as the basis for their monetary strategies. After outlining the reasons why such strategies might be adopted in the pursuit of price stability, this study examines the adoption, operational design, and...

Countries with high debt loads are vulnerable to an adverse feedback loop in which doubts by lenders lead to higher sovereign interest rates which in turn make the debt problems more severe. We analyze the recent experience of advanced economies using both econometric methods and case studies...

This paper examines the relationship of the term structure of interest rates to monetary policy instruments and to subsequent real activity and inflation in both Europe and the United States. The results show that monetary policy is an important determinant of the term structure spread, but it...

This paper examines fifteen historical episodes of stock market crashes and their aftermath in the United States over the last one hundred years. Our basic conclusion from studying these episodes is that financial instability is the key problem facing monetary policy makers and not stock market...