Mortgages are long-term nominal loans. Under incomplete asset markets, monetary policy
is shown to affect housing investment and the economy through the cost of new mortgage
borrowing and the value of payments on outstanding debt.
The consensus in monetary policy circles that the Fed’s large-scale asset purchases, known as quantitative easing (QE), have significantly reduced long-term yields is due in part to event studies, which show that long-term yields decline on QE announcement days.
We consider the effect of some policies intended to shorten recessions and accelerate recoveries. Our innovation is to analyze the duration of the recoveries of various U.S. states, which
gives us a cross-section of both state- and national-level policies.
We study the use of intermediated assets as media of exchange in a neo-
classical growth model. An intermediary is delegated control over productive
capital and finances itself by issuing claims against the revenue generated by
We use a general equilibrium finance model that features explicit government purchases
of private debts to shed light on some of the principal working mechanisms of the Federal
Reserve’s large-scale asset purchases (LSAP) and their macroeconomic effects.
This paper deals with a classic development question: how can the process of economic
development – transition from stagnation in a traditional technology to industrialization
and prosperity with a modern technology – be accelerated?
This paper uses several methods to study the interrelationship among Divisia monetary aggregates, prices, and income, allowing for nonstationary, nonlinearities, asymmetries, and time-varying relationships among the series.
Increasing the independence of a central bank from political influence, although ex-ante
socially beneficial and initially successful in reducing inflation, would ultimately fail to lower
We evaluate the ability of generational accounting to assess the potential welfare
implications of policy reforms. In an intergenerational context policy reforms usually
have redistributive, efficiency, and general equilibrium implications.
Most empirical studies based on U.S. data suggest that the fiscal multiplier is less
than 1 (e.g., Barro and Redlick, 2011). However, Keynes argued that the multiplier
would be the largest when markets have failed to the greatest extent in coordinating
economic activities (such as during the Great Depression with rampant unemployment
and low capacity utilization).
Forecasts are a central component of policy making; the Federal Reserve's forecasts are published in a document called the Greenbook. Previous studies of the Greenbook's inflation forecasts have found them to be rationalizable but asymmetric if considering particular sub-periods, e.g., before and after the Volcker appointment.
We construct a model to capture the Keynesian idea that production and employment
decisions are based on expectations of aggregate demand driven by sentiments and
that realized demand follows from the production and employment decisions of firms.
On May 29, 2008, the Wall Street Journal reported that several large international banks were reporting unjustifiably low LIBOR rates. Since then two large banks, Barclays and UBS, have paid significant fines for manipulating their LIBOR rates, and additional banks are expected to be fined.
We study the roles private information and capital accumulation play in the structure of
partnerships. Partnerships are ventures formed with capital contributions from two members
who initially share ownership of a business.
We estimate a DSGE model with (S,s) inventory policies. We find that (i) taking
inventories into account can significantly improve the empirical fit of DSGE models
in matching the standard business-cycle moments (in addition to explaining inventory
fluctuations); (ii) (S,s) inventory policies can significantly amplify aggregate output
fluctuations, in contrast to the findings of the recent general-equilibrium inventory
literature; and (iii) aggregate demand shocks become more important than technology
shocks in explaining the business cycle once inventories are incorporated into the