This paper examines five possible explanations for the Great Recession of 2008 and 2009, using data for the United States and the eurozone. Of these five hypotheses, four are not supported by the data, while the fifth appears reasonable.

Deciding to undertake a series of tightening actions present unique challenges for Federal Reserve policymakers. These challenges are both political and economic. Using a variety of economic and financial market metrics, this article examines how the economy and financial markets evolved in...

This paper investigates changes in the conduct of U.S. monetary policy. Monetary policy is modeled in the context of the Bernanke-Mihov (1998) structural VAR (SVAR) extended to allow explicitly for the Fed's forward looking behavior. This is achieved by including its real-time forecasts on...

The nature of monetary policy during the 1970s is evaluated through the lens of a forward-looking Taylor rule based on perceptions regarding the outlook for inflation and unemployment at the time policy decisions were made. The evidence suggests that policy during the 1970s was essentially...

In a sticky-price model where firms finance their production inputs, there is both a lower and an upper bound on the central bank's inflation response necessary to rule out the possibility of self-fulfilling inflation expectations. This paper shows that real wage rigidities decrease this upper...

This paper surveys the co-evolution of monetary policy and financial stability for a number of countries across four exchange rate regimes from 1880 to the present. Historical evidence is presented on the incidence, costs and determinants of financial crises along with some empirical evidence on...

A numerical measure of central bank credibility, which can be incorporated into a New Keynesian model under bounded rationality, is proposed and analyzed. This measure arises mainly due to the existence of the drifts in private long-term predictions, which are different from those of the central...

We propose a new housing portfolio channel through which QE affects output. In response to QE, intermediaries rebalance portfolios from bonds to houses, lowering the return to saving and stimulating consumption and output. We study this channel empirically in a German housing boom without credit...

The euro-area sovereign debt crisis was characterized by feedback loops between (1) sovereign bond ratings and sovereign spreads in single jurisdictions and (2) sovereign spreads and ratings among jurisdictions. One explanation of this circumstance is that the ECB was unable to perform the role...