This paper estimates an empirical model of exchange rates and uncovered interest rate differentials with permanent U.S. monetary policy shocks. Using post-Bretton-Woods data from the United States, the United Kingdom, Japan, and Canada, it reports two main findings: First, monetary shocks that...

The neo-Fisher effect and the central bank information (CBI) effect produce similar outcomes: under both, a monetary tightening triggers an increase in inflation and an expansion in real activity. Separate estimates of these effects run the risk of confounding one with the other. To disentangle...

SVAR models that include a single world price (such as the terms-of-trade) predict that world shocks explain a small fraction of movements in domestic output (typically less than 10 percent). This paper presents an empirical framework in which multiple commodity prices transmit world...

We estimate an empirical model of exchange rates with transitory and permanent monetary shocks. Using monthly post-Bretton-Woods data from the United States, the United Kingdom, and Japan, we report four main findings: First, there is no exchange rate overshooting in response to either temporary...

Much of the empirical literature on the natural rate of interest has focused on estimating its path. This paper addresses the question of how exogenous movements in the natural rate of interest affect aggregate activity and inflation in the short and long runs. To this end it proposes a...

In this paper, we perform a structural Bayesian estimation of the contribution of anticipated shocks to business cycles in the postwar United States. Our theoretical framework is a real-business-cycle model augmented with four real rigidities: investment adjustment costs, variable capacity...