Real-business-cycle models suggest that an increase in the rate of productivity growth increases the real rate of interest. But economic theory is ambiguous when it comes to the effect of government budget deficits on the real rate of interest. Similarly, little is known about the effect of...

When oil prices jump, people get jumpy-especially when the Fed is bumping up interest rate targets at the same time. Why? Because these two events have accompanied virtually every recession since World War II. At least until now.

Economic news affects the perceptions of investors, forecasters, and policymakers about the strength or weakness of the economy. These expectations are updated on the basis of regularly occurring surprises in macroeconomic announcement data. The response of asset prices to positive or negative...

On the plus side, low interest rates can spur spending by businesses and households. But low interest rates discourage saving and encourage people to take more risks when investing.

Presentation to the Money Marketeers of New York University, New York City - Sept. 21, 1999

Address before Bryant College, Providence, R.I., Oct. 14, 2003

We study a simple, microfounded macroeconomic system in which the monetary authority employs a Taylor-type policy rule. We analyze situations in which the self-confirming equilibrium is unique and learnable according to Bullard and Mitra (2002). We explore the prospects for the use of ‘large...

This article examines the dynamic relationship between two key U.S. money market interest rates - the federal funds rate and the 3-month Treasury bill rate. Using daily data over the period 1974 to 1999, we find a long-run relationship between these two rates that is remarkably stable across...