Working Papers

"Central Bank Independence at Low Interest Rates," with Benjamin Garcia, Central Bank of Chile. 

 Accepted, Journal of Money, Credit, and Banking

We create a new measure of the political pressure faced by the Federal Reserve based on the analysis of transcripts of the Chairs' testimonies to Congress. We find that the use of non-traditional policies at low interest rates led to increased political criticism and that criticism predicts legislative actions that threaten central bank independence. We develop a model where the probability of the monetary authority's future loss of independence is increasing in the use of non-traditional instruments, leading to attenuated monetary responses and higher inflation volatility.  This attenuation can be mitigated under an institutional framework with clearly defined targets where the central bank is evaluated by how efficiently it achieves its goals.  

Data and replication file

"Inflation Expectations and the Persistence of Unanticipated Inflation"

How do inflation expectations affect the dynamics of surprise inflation?  I document that long-run inflation expectations respond more to large inflation surprises, leading to a nonlinear relationship between inflation expectations and unanticipated inflation.  A stylized model illustrates that this nonlinear response implies that inflation expectations amplify the effect of surprise inflation on future realized inflation.  Mapping this prediction to the data, I find that the response of long-run inflation expectations determines the persistence of the surprise component of inflation.

"Government Debt, Limited Foresight, and Longer-term Interest Rates," with Chris Gust, under review

We study the relationship between government debt and interest rates in an environment where financial market participants have limited foresight about the future path of government debt.  We show that limited foresight substantially attenuates estimates of the effect of government debt on longer-term yields relative to the benchmark of rational expectations often used in empirical analysis.  

"Industry Growth at the Zero Lower Bound," under review

I show that if monetary policy is constrained by a lower bound on short-term interest rates, industries typically affected by monetary policy are disproportionately negatively affected. I test for this prediction in US data over 2008-2014 using multiple data sources and measures of monetary policy sensitivity. I find little evidence that growth was negatively affected, suggesting that the Federal Reserve's monetary policy was not very constrained by the lower bound.

Note: the paper above supersedes the paper "How Effective is Monetary Policy at the Zero Lower Bound? Identification Through Industry Heterogeneity"   (FEDS paper version)

Media: MarginalRevolution, The Brookings Institution

Resting Papers

"Inferring the Shadow Rate from Real Activity"  with Benjamin Garcia, Central Bank of Chile

We estimate a shadow rate consistent with the paths of time series capturing real activity. This allows us to quantify the real effects of unconventional monetary policy in terms of equivalent short-term interest rate movements. We find that large-scale asset purchases and forward guidance had significant real effects equivalent of up to a four percent reduction in the federal funds rate.

Work in Progress 

"Characterizing Treasury Debt Management," with Kyungmin Kim

"Fiscal Dominance," with Margaret Jacobson

FEDS Notes

"Substitutability of Monetary Policy Instruments," with Cynthia Doniger, James Hebden, and Luke Pettit.

Discussions

Discussion of “Monetary Policy Operating Procedures, Lending Frictions, and Employment,” by David Florian-Hoyle, Chris Limnios and Carl Walsh. XX Annual Inflation Targeting Conference, Rio de Janeiro, Brazil, May 2018.

Discussion of “In Feds Watchers’ Eyes: Hawks, Doves, and Monetary Policy,” by Klodiana Istrefi. Banque de France, Paris, France, July 2019.

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