This paper develops and estimates a macro-finance model that combines a canonical affine no-arbitrage finance specification of the term structure with standard macroeconomic aggregate relationships for output and inflation. From this new empirical formulation, we obtain several important...

Differences between yields on comparable-maturity U.S. Treasury nominal and real debt, the so-called breakeven inflation (BEI) rates, are widely used indicators of inflation expectations. However, better measures of inflation expectations could be obtained by subtracting inflation risk premiums...

This paper examines welfare-maximizing monetary policy in an estimated dynamic stochastic general equilibrium model of the U.S. economy where the policymaker faces uncertainty about the true values of model parameters. Uncertainty about parameters describing preferences and technology implies...

The recent financial crisis saw a dramatic and persistent jump in interest rate spreads between overnight federal funds and longer-term interbank loans. The Fed took several actions to reduce these spreads, including the creation of the Term Auction Facility (TAF). The effectiveness of these...