What the Fed said last year it could do if deflation surfaced was one thing. What the markets heard was another. The result was mania in the bond and mortgage markets.

Some people complain they are being gouged at the pump, but raising prices now in anticipation of what might happen helps ensure an adequate gas supply.

For many years after the seminal work of Meese and Rogoff (1983a), conventional wisdom held that exchange rates could not be forecast from monetary fundamentals. Monetary models of exchange rate determination were generally unable to beat even a naïve no-change model in out-of-sample...

The real interest rate plays a central role in many important financial and macroeconomic models, including the consumption-based asset pricing model, neoclassical growth model, and models of the monetary transmission mechanism. The authors selectively survey the empirical literature that...

This article uses probability forecasts derived from options to assess evolving market uncertainty about Federal Reserve monetary policy actions in a variety of recent events and episodes. Options on federal funds futures contracts reveal a complete probability density function over possible...