Working papers are academic research by SF Fed economists and affiliates intended for publication in scholarly journals. This section contains working papers on monetary economics and macro-finance topics that have been authored or co-authored by SF Fed Economists.
-
Financial Market Effects of FOMC Communication: Evidence from a New Event-Study Database
Miguel Acosta, Andrea Ajello, Michael Bauer, Francesca Loria, Silvia Miranda-Agrippino
This paper introduces the U.S. Monetary Policy Event-Study Database (USMPD), a novel, public, and regularly updated dataset of high-frequency financial market data around Federal Open Market Committee (FOMC) policy announcements, press conferences, and minutes releases. Using the rich data in the USMPD, we document several new empirical findings. Large monetary policy surprises have made a…
-
Not All Inflation Is the Same: State-Dependent Transmission of Monetary Policy
Rami Najjar, Adam Shapiro
We show that the underlying source of inflation impacts financial market perceptions of the persistence of monetary policy surprises. Financial markets expect policy surprises to be more persistent when inflation is driven by demand factors. During supply-driven episodes, markets perceive these surprises as less persistent. This divergence in perception arises from markets updating their beliefs…
-
Monetary Policy and the Medium-Run Natural Rate of Interest
Vasco Curdia
The natural rate of interest—the real short-run rate consistent with the economy at potential—is essential for central banks’ policy rate calibration. However, empirical model-based estimates are often too imprecise and volatile for practical policymaking. Purely statistical measures, meanwhile, lack sufficient theoretical grounding. This paper proposes a medium-run natural rate measure that smooths excessive short-term fluctuations…
-
Accounting for Uncertainty and Risks in Monetary Policy
Michael Bauer, Travis Berge, Giuseppe Fiori, Francesca Loria, Molin Zhong
This paper discusses the measurement, assessment, and communication of risks and uncertainty that are relevant for monetary policy. It provides a taxonomy of policy-relevant uncertainty related to the state and the structure of the economy, and the formation of expectations. A wide range of tools is available to assess and quantify uncertainty and the balance…
-
Evaluating Macroeconomic Outcomes Under Asymmetries: Expectations Matter
Brent Bundick, Isabel Cairo, Nicolas Petrosky-Nadeau
Asymmetries play an important role in many macroeconomic models. We show that assumptions on household and firm expectations play a key role in determining the effects of these asymmetries on macroeconomic outcomes. If households and firms have perfect foresight and hence do not account for the possibility of future shocks, then the implied longer-run averages…
-
Inflation Since the Pandemic: Lessons and Challenges
Ina Hajdini, Adam Shapiro, A. Lee Smith, Daniel Villar
This paper reviews the drivers of the post-pandemic U.S. inflation surge and subsequent decline, including the behavior and role of inflation expectations. The sharp rise in inflation reflected severe imbalances between supply and demand stemming from the shocks of the pandemic and the policy response. Measures of short-term inflation expectations increased alongside realized inflation, especially…
-
A Tale of Two Tightenings
Simon H. Kwan, Ville Voutilainen
Both the magnitude and the pace of monetary policy tightening in the euro area during 2022-23 were historically large and fast. Yet, the real economy proved to be resilient. In this paper, we analyze the pass through of the ECB’s changes in the policy rate to mortgage rates in Finland during the post-pandemic period of…
-
Asset Purchases in a Monetary Union with Default and Liquidity Risks
Huixin Bi, Andrew Foerster, Nora Traum
We develop a nonlinear two-country monetary union model with endogenous sovereign default and financial intermediation to study the effects of targeted asset purchases, and expectations of such programs, during sovereign debt crises. Default risk increases with government debt and shifts in investors’ perceptions of fiscal solvency. We calibrate the model to Italy and Germany during…
-
Demand versus Supply: Which Is More Important for Inflation?
Kevin J. Lansing
The author uses Phillips curve type regressions to assess the relative contributions of demand and supply forces to U.S. inflation during the pandemic era (February 2020 onward) and the decade after the Great Recession. Model 1 measures demand and supply using the vacancy-unemployment ratio and the New York Fed’s Global Supply Chain Pressure Index. Model…
-
The Bank Lending Channel Is Back
Mark M. Spiegel
The period following the global financial crisis was marked by low interest rates and low responsiveness of bank lending to monetary policy. This led some to conclude that the bank lending channel for monetary policy to influence economic activity had weakened. This paper revisits the responsiveness of the bank lending channel using a bank-level panel…