What the market thinks is most likely to occur is not necessarily what the market expects to occur. This note explains why most of the surveys of federal funds rate outlook deviate substantially from the true market expectation, especially as the forecast horizon increases. Surveys often ask...

We present a microfounded two-country model of global imbalances and debt deleveraging. A sustained rise in saving in one country can lead to a worldwide fall in interest rates and an accumulation of debt in the other country. When a subsequent deleveraging shock occurs, interest rates are...