Hess Chung, Callum Jones, Antoine Lepetit, and Fernando M. MartinThis paper considers robust monetary policy strategies both in situations of low demand and low inflation and when economic developments pose a tradeoff between inflation and output stabilization. We proceed in two parts.
Anna Lipińska, Enrique Martínez García, and Felipe SchwartzmanThis paper examines the drivers of the 2020–23 inflation surge, with an emphasis on the similarities and differences across countries, as well as the role that monetary policy frameworks might have played in shaping central banks’ responses. The inflation surge in the U.S. and abroad was set in motion by two global events: the COVID-19 pandemic and Russia’s invasion of Ukraine.
Ina Hajdini, Adam Shapiro, A. Lee Smith, and Daniel VillarThis 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.
Ekaterina Peneva, Jeremy Rudd, and Daniel VillarThis paper examines the Board staff’s inflation forecast misses over the years following the COVID-19 outbreak, focusing on a timeline of what staff members knew when and lessons learned along the way.
Brent Bundick, Isabel Cairó, and Nicolas Petrosky-NadeauThis paper reviews recent academic studies to assess the implications of adopting a shortfalls, rather than a deviations, approach to pursuing maximum employment. Model-based simulations from these studies suggest three main findings. First, shortfalls rules generate inflationary pressure relative to deviations rules, which offsets downward pressure on inflation stemming from the presence of the effective lower bound.
Christopher Foote, Shigeru Fujita, Amanda Michaud, and Joshua MontesWe suggest a core set of indicators for evaluating the position of the labor market relative to maximum employment. The unemployment rate remains the key indicator of the cyclical position of the labor market, as it is time-tested, is highly correlated with other indicators, and has practical measurement advantages. But other indicators can provide complementary evidence to get a fuller picture of the labor market.
Grey Gordon, Julio Ortiz, and Benjamin SilkWe examine the experience of conducting reviews of monetary policy frameworks in the major advanced foreign economies since the Federal Open Market Committee's 2019–20 review. We find that periodic reviews are becoming the norm and have often been motivated by similar developments and challenges as those facing the Federal Reserve.
François Gourio, Benjamin K. Johannsen, and David López-SalidoIn this paper, we describe the Federal Reserve’s 2019–20 review of its monetary policy framework. First, we discuss the historical background of and motivation for the review.
This paper studies the role of financial intermediaries in the transmission of central bank corporate bond purchases to bond yields. Contrary to standard expectations, we find that mutual funds—typically viewed as price-elastic investors—amplify, rather than dampen, the effects of these interventions on bond spreads.
Hitesh Doshi, Hyung Joo Kim, and Sang Byung SeoThe identification of disaster risk has remained a significant challenge due to the rarity of macroeconomic disasters. We show that the interbank market can help characterize the time variation in disaster risk. We propose a risk-based model in which macroeconomic disasters are likely to coincide with interbank market failure. Using interbank rates and their options, we estimate our model via MLE and filter the short-run and long-run components of disaster risk.
