adaptive expectations, 100–101aggregate demand, 48, 96

curve of, 47, 54–55depression of, 227impact of, 64relationship of, 45–46, 46f

aggregate savings, 46AIG, 4Alitalia, 85American Finance Association, 125America’s Bank (Lowenstein), 207artifi cial intelligence, 235asset prices, 238, 245assets

on balance sheet, 3business, 77, 79Cochrane on, 255government, 31–32, 31f, 77, 123long- dated, 38long- term, 13premiums on, 32–33, 37purchases of, 3QE on, 253–54risky, 7n5safe, 7, 228–29, 257–58, 282–83tax on, 11trading of, 236

Atkeson, Andrew, 64–65authorities, 2

discretionary, 16See also fi scal authorities

Bagehot, Walter, 242Bai, Jennie, 34bail- ins, 222, 226bailouts, 8–9, 222, 224–25, 233balance sheet, 2, 17t

adjustments to, 240asset side of, 3

Bullard on, 251–52of central bank, 164–65Cochrane on, 34–35, 40, 43, 249–50, 284composition of, 14–15, 23, 27concerns for, 32constraints on, 15Dotsey on, 36–37Duffi e on, 34–35on economy, 255Evans on, 250–51Fisher, P., on, 37–38FOMC on, 13–14future for, 22–25as hedge fund, 8impacts on, 16–20institutions for, 3Krishnamurthy on, 37, 39liability side of, 4Liesman on, 42Nelson, W., on, 40–42operating regime of, 8Plosser on, 35–36, 39–40presentations on, 254–55purposes for, 8reduction of, 20–22risks for, 7–10Rosengren on, 252–53, 280–81Shultz on, 39size of, 5–7, 14–15, 17, 23–35structure of, 3–4Taylor on, 35, 40, 42–43with Treasury, 27–30wide- open, 250

band, 24band pass fi lter, 72–73Bank of Canada, 198Bank of England, 152, 215, 219, 240, 247Bank of India, 220Bank of Israel, 210

Index

298 Index

Bank of Japan, 40, 167–68banks

interest to, 5, 9loans from, 18losses of, 223–24presidents of, 207stress tests at, 265–66See also central bank

Barrdear, John, 152Bear Stearns, 4behavioral economics, 187–88benchmark

defi nition of, 219–20policy, 86–87rules for, 203–6, 210–11of Taylor rule, 203

Benhabib, Jess, 110–11Bernanke, Ben, 13, 21, 255–56Bewley, Truman, 161Beyer, Robert, 52–54“big bazooka,” 225Bismarck, 233bitcoin, 134n7, 151n34, 151n35, 182

See also cryptocoinBitcoin Unlimited, 135n9, 138, 142Blanchard, Olivier, 165n66Blockchain, 133Blue Books, 203–4Board of Governors, 9, 12–13, 108Bogdanova, Bilyana, 55boilerplate language, 196–97bonds, 4n3, 230

demand for, 103development, 8government, 85–86investors of, 241joint liability, 225junior, 229, 233long, 241senior, 229, 233

Bordo, Michaelon payments, 181, 185–86on strategy, 220

Boskin, Michael, 217Brazil, 103Bretton Woods, 168, 210Brexit, 222, 233–34Brunner, Karl, 1–2Brunnermeier, Markus

on euro crisis, 232–34on ZLB, 125

Brussels, 229–30budget, 91, 110–11

Bullard, James, 130, 198on balance sheet, 251–52on communication, 272on forecasts, 280on models, 269–70on policy reform, 245, 271–72on robustness, 267–68on r- star, 256–58on rules, 272–73on safe assets, 282–83on strategy, 255on thresholds, 265on Treasuries, 284on ZLB, 260–63

business, 77, 79See also start- ups

business cyclestabilization of, 63–64traditional, 72

Calvo parameter, 114–15cameralism, 227–28Cameron, David, 225Canada, 214capital, 78f, 224

allocation of, 62–63business, 77, 79private, 85–86

capital fl ow management, 187–88capital investments, 79–80Carnegie- Rochester Conference Series on

Public Policy, 2CBDC. See central bank digital currencyCBO. See Congressional Budget Offi cecentral bank, 2, 97

balance sheet of, 164–65challenges of, 219–20comparison of, 200deviation of, 55digital currency and, 143–71evolution of, 186future of, 242–43interest rate of, 62, 71–72policies of, 205reputations of, 168responsibilities of, 167–68

central bank digital currency (CBDC), 144account- based, 152benefi ts of, 148–49, 168CBDC accounts, 150–51CBDC tokens, 150challenges for, 170–71cost of, 146

Index 299

design of, 146–47fi scal authorities and, 145–46on infl ation, 146–47interest rate on, 164interest- bearing, 158–59, 163paper currency and, 154–55strategy of, 153

“channel system,” 6China, 183CHOICE Act, 198Christiano, Lawrence, 108, 113, 127–28Clarida, Richard, 128–30closed- economy model, 246Cochrane, John, 191–92

on assets, 255on balance sheet, 34–35, 40, 43, 249–50,

284challenge to, 120–21on forecasts, 265–66on groupthink, 265on models, 270on natural rate, 83–85on QE, 253–54on r- star, 256on strategy, 261theories of, 104–6, 112–13on Treasuries, 284on ZLB, 123–29, 179–80, 260

Committee. See Federal Open Market Committee

committeesbenefi ts of, 209–10, 210n20communication in, 208–9cooperation in, 246decision process of, 207, 210, 264deliberations in, 209–10double votes in, 216mandates in, 209on policies, 207–10principles of, 216–17role of, 207–10size of, 215–16strategy of, 214systems of, 208See also Federal Open Market Committee

Commodity Futures Trading Commission, 153n38

communication, 241–42Congress, US, 8–9

concerns of, 37–38on laws, 244

Congressional Budget Offi ce (CBO), 123–24constant linear multiplier, 118–19

Consumer Financial Protection Bureau, 9, 10Conti- Brown, Peter, 240–41contingency planning, 220contracts, 70–71corridor, 6–7, 24cost- benefi t trade- off , 37credit

allocation of, 8, 24–25cryptocurrencies and, 137–38policy on, 4, 37–38

credit cards, 146credit rate, 6credit risk, 254cryptocoin, 134cryptocurrencies, 136, 180

control over, 183credit and, 137–38design of, 183–84on government, 141–42privacy with, 181security of, 184–85value of, 138–39

cryptography, 137n12Cukierman, A., 54–55currency

competition of, 141demand of, 5, 18Evans on, 268–69growth of, 4history of, 143–44reserves and, 24–25See also paper currency

curve fail, 31cybersecurity, 183Cyprus bail- in, 222, 226–27

datadependent on, 219–20observable, 57

Davis, Steve, 70–71Deauville decision, 230debt

government, 38, 77, 180long- term, 95–96, 217market value of, 96restructuring of, 223, 226return of, 103short- term, 31–32, 91

debt restructuring, 223debt- to- GDP ratio, 123Decentralized Autonomous Organization,

135n8defl ation, 87, 125

300 Index

Del Negro model, 57demand curve, 225–26democracy, 2, 209–10, 251depository services, 25diabolic loop, 228–29digital currency

central bank and, 143–71concerns for, 179–80implementation of, 184–86interest rate on, 181–82

discount rates, 103–4, 189–90disinfl ation, 188–89, 198dispersion, 28–29distributed ledger, 133–36, 136n10distributed ledger technology (DLT), 150distribution, 71diversifi cation, 9dividends, 123–24DLT. See distributed ledger technologyDNWR. See downward nominal wage rigidityDodd- Frank, 244dominant economic framework, 246dominant model, 246dot plan, 275Dotsey, Michael

on balance sheet, 36–37on natural rate, 81–83

downward nominal wage rigidity (DNWR), 160–61

Draghi, Mario, 58–59, 221–22, 225DSGE. See dynamic stochastic general

equilibriumDuca, John, 185Duffi e, Darrell, 28, 30, 34–35dynamic stochastic general equilibrium

(DSGE), 47, 152, 191Dyson, Ben, 152–53

easing, 87ECB. See European Central Bankeconometric derivation, 205econometric estimates, 94–95economy

balance sheet on, 255challenges for, 247closed- economy model, 246comparative conditions of, 211growth of, 18, 42infl ation on, 260–61innovation economy, 235interest rates on, 34, 89–90, 189–90new conditions of, 205–6politics and, 10, 227, 244

resilience of, 236shocks on, 236–37US, 64, 90f

Eichenbaum, Martinon natural rate, 85–86on regulatory policy, 281–82on ZLB, 127–30

electronic money, 102equilibrium rate, 47

long- run, 48, 82medium- run, 48–49

equilibrium real interest rate, 45–46decline of, 51impacts on, 55medium- run nature, 47–48short- run, 47time horizons on, 47time- varying, 59

equilibriumslearnable, 129multiple, 110–13value of, 109–10See also rational expectations equilibrium

Erceg, Chris, 127ESBies. See European safe bondsEthereum, 138, 142, 150n32euro, 48, 52–53

development of, 233dollar into, 179

The Euro and the Battle of Ideas (Brunnermeier and James), 221

euro crisis, 228–29Brunnermeier on, 232–34Mulford on, 233Wieland on, 231–32

Eurobonds, 225, 229, 233Europe, 89, 103

challenges in, 227continental, 234

European Central Bank (ECB), 8–9, 167, 217–18

European Commission, 221European Council, 221European junior bond, 229–30European safe bonds (ESBies), 229–30European senior bond, 229–30European Union, 227Evans, Charles, 199, 265

on accountability, 272–73on balance sheet, 250–51on currency, 268–69on forecasts, 279–80on purchases, 255–56

Index 301

on risks, 278–79on strategy, 259–60, 263–64on Treasuries, 284

ex post patches, 101–2exchange

effi cient medium of, 146, 149–55fi xed rates of, 224fl exible rate of, 189government on, 136–37pegged rates of, 224stability of, 136–37

exchange rateconcerns of, 194volatility of, 224, 252

federal funds rate, 21f, 55adjustment of, 208behavior of, 202–3futures market of, 106–8, 107fimpact of, 205n12long- term, 252

Federal Open Market Committee (FOMC), 5–6, 12, 40, 65, 162n60, 162n61

on balance sheet, 13–14communications in, 209decisions from, 201diversity in, 215fl exibility in, 209framework of, 207–8goals of, 207impact of, 217intentions of, 247strategy of, 21–23, 193, 198–99

Federal Reserve, US (Fed)authority of, 244challenges of, 245communications of, 244contribution from, 8credibility of, 242fi nancial crisis and, 238framework of, 239functions of, 239future of, 254–57, 272–73groupthink at, 245independence of, 2–3, 9liquidity support from, 24mandates of, 3, 33market and, 11notes from, 18outlook of, 237on payment systems, 131–32on population growth, 261on productivity growth, 261

reform in, 271–72regulations of, 239–40responsibilities of, 237role of, 12–16staff of, 203–4strategy of, 197, 239, 255trust in, 181

Federal Reserve Act, 15, 84–85, 197Federal Reserve Board of Governors, 63, 65,

189, 193–94Federal Reserve Board San Francisco, 50–51federal structure, 227Fernández- Villaverde, Jesús, 137n11, 139,

169, 180–85fi nancial accelerator, 191, 199Financial CHOICE Act, 193–94fi nancial crisis, 16–17, 170–71, 205

Federal Reserve and, 238impact of, 220predicting, 266recovery of, 260See also recession

fi nancial friction, 199fi nancial institutions, 193fi nancial market, 3, 238fi nancial market utilities (FMUs), 147, 153fi nancial stability, 14–15, 31, 41, 228FINRA rule requirements, 134–35fi scal authorities, 9, 16, 39–40, 167–68

CBDC and, 145–46fi scal foundations, 103–4fi scal multiplier, 117–20, 118f, 119ffi scal theory, 92–93Fischer, Stanley, 189–92, 214–20Fisher, Irving, 85Fisher, Peter, 23, 181, 184–85

on balance sheet, 37–38proposal of, 218

Fisher equation, 63–64Fisherian, 98, 117fl oor system, 6–7, 24, 41–42

control of, 13fi rm, 11–12

FMUs. See fi nancial market utilitiesFOMC. See Federal Open Market Committeeforecast

Bullard on, 280challenges to, 261Cochrane on, 265–66confi dence interval, 237Evans on, 279–80of GDP, 108of Green Book, 108

302 Index

of infl ation, 64–67, 88point, 265–66of real rate of interest, 86–87traits for, 237unanimity of, 236See also Stock- Watson forecasts

forecast targeting, 148foreign banks, 10, 11framework, 15, 23–24, 35–36France, 73–74

attack on, 228straitjacket commitments of, 223–24strategy of, 222–25war in, 228

FRB/US model, 196, 198, 245Frederick the Great, 227–28free capital fl ows, 224frictions, 95, 97, 101–2Friedman, Milton

advocacy of, 205n14, 206n14on natural rate, 84on ZLB, 126, 141n13, 146, 188–89

funds rate, 5, 35–36, 40–41average of, 28average real federal, 58control of, 12–13prescriptions of, 59–60short- term risk- free, 6See also federal funds rate

futures market, 106–8, 107f

Gabaix, Xavier, 114Gabaix model, 114, 119fGabaix- style behavioralism, 114Garnier, J., 52–53GDP. See gross domestic productgeopolitical security, 234Germany, 52–53, 73–74

attack by, 228federal structure in, 227strategy of, 222–25war in, 227–28

gold standard, 187–88government

assets of, 31–32, 31f, 77, 123bonds of, 85–86on cryptocurrencies, 141–42debt of, 38, 77, 180on exchange, 136–37securities of, 31–32tax revenue of, 223–24

government- sponsored enterprises, 20Great Convergence, 198

Great Depression, 255–56Great Infl ation, 168Great Moderation, 190, 265–66Great Recession, 62, 104–5, 109, 196Greece, 221, 223, 226Green Book, 32, 108Greenspan, Alan, 163n63, 202–3, 220gross domestic product (GDP), 46, 59–60

borrowing against, 104forecasts of, 108growth rate of, 49, 86–87paper currency and, 154patterns with, 72–73price index of, 166–67

groupthink, 245–46, 264–65

Hansen, Gary D., 71–72Hayek, F. A., 136–37, 139–40hedge fund, 8Heller, Robert, 198, 215, 220, 277high equity premium, 85–86high- quality liquid assets (HQLA), 41Hodgson, Graham, 152–53Hodrick, Laurie, 180, 183Hodrick, Robert “Bob,” 179, 182, 183Hofmann, Boris, 55Holston, K., 48, 51honeypot, 39Hoover Institution, 1, 235Hoover Institution Monetary Policy Confer-

ence, 236House Financial Services Committee, 193–94housing sector, 4HQLA. See high- quality liquid assetsHyperledger, 133

IMF. See International Monetary FundIMF–World Bank meetings, 187–88incentives, 40independence

compromising of, 10of Fed, 2–3, 9

independent agencies, 25infl ation, 42, 81

causes of, 43CBDC on, 146–47dangers of, 64decline in, 94–95on economy, 260–61estimate of, 55forecasts of, 64–67, 88goals for, 168n70impact on, 252interest rate on, 94–98, 95f, 96f, 103–4

forecast (continued)

Index 303

in Japan, 130measure of, 236nominal interest rate on, 114–17numerical objectives of, 162–63outcomes of, 88personal consumption expenditures, 53–54Phillips curve on, 104response of, 115fstability of, 91–92, 100–101target rate of, 111, 199theories of, 90unemployment rate on, 65–67

infl ation gap, 196infl ation targeting, 214–15infrastructure initiatives, 8innovation economy, 235institutions

for balance sheet, 3depository, 35–36design of, 39–40non- depository, 35–36policy on, 2

interest on excess reserves (IOER), 20, 23, 30, 41

interest rateaverage, 82to banks, 5, 9on CBDC, 164of central bank, 62, 71–72control of, 34on digital currencies, 181–82economy on, 34, 89–90, 189–90fl exible- price, 81–82future, 120infl ation on, 94–98, 95f, 96f, 103–4long- run, 81market- determined, 23–24, 26negative, 199neutral, 208–9pass- through of, 43policies of, 64reserves and, 6–7, 10, 13–15, 24–25response of, 115fRosengren on, 254–55short- term, 24, 201–2as stabilization tool, 62–64steady- rate, 48for Treasury, 34in United States, 103–4See also equilibrium real interest rate;

natural real interest rate; nominal interest rate

interest rate paid on reserves (IOR), 6–7, 9–10, 12–13, 169

international fi nancial system, 25International Monetary Fund (IMF), 229–30international spillovers, 239“intertemporal,” 91intervals, 56–57intraday volatility, 36–37, 41investments, 77, 79

demand on, 46, 55policy on, 9

IOER. See interest on excess reservesIOR. See interest rate paid on reservesIsrael, 216Italy, 86

Jacobson, Louis S., 70–71James, Harold, 221Japan, 89, 99, 103, 200

future for, 263infl ation in, 130

JEC. See Joint Economic CommitteeJohansen, Benjamin, 113Joint Economic Committee (JEC), 272Journal of Money, Credit, and Banking and the

Journal of Monetary Economics, 1Journal of Political Economy, 189Judd, Kenneth, 129

Kahn, George, 24Keister, Todd, 25Kenya, 149, 153Keynesian stimulus, 227Keynesian- style model, 48Kim, Don H., 106, 108Kohn, Donald, 24, 203–4Krishnamurthy, Arvind, 37, 39Krugman, Paul, 51–52Kumhof, Michael, 152

Lagos, R., 140Lagos and Wright model, 139Lalonde, Robert J., 70–71Landau, Jean Pierre, 221Laubach, Thomas, 47–52, 179Laubach- Williams medium- run r- star esti-

mates, 53, 58Laubach- Williams method, 54layoff s, 70–71learning model, 118–19Leeper, E. M., 269legislation, 13Levin, Andrew

on natural rate, 86–88on rules, 218–20on ZLB, 123–24, 127, 166, 181–85

304 Index

liabilitieson balance sheet, 4joint, 225, 229, 233managed, 189–90short- dated, 38solidarity against, 224value of, 224–25

LIBOR, 41Liesman, Steve, 42Linux Foundation, 133liquidity

of bail- ins, 226benefi ts of, 34problems with, 225–26Rosengren on, 283–84support from, 18

liquidity coverage ratio rule, 34–35, 41Lockhart, Dennis, 279London School of Economics, 206long- run components, 72–75, 72f, 73f, 74f,

75f, 76flong- term repos, 11Lowenstein, Roger, 207Lucas, Robert E., Jr., 69–70, 109–10

Maastricht Treaty, 224–27battle lines during, 228negotiation of, 228–29

macro evidence, 42macro models, 36–37macroeconomics, 187–88

aggregate conditions of, 238challenges to, 259–60fl uctuations of, 71–76goals of, 211instability of, 169microfoundations of, 239modern, 256–57policy of, 237stabilization of, 71–72variables of, 63–64

mandates, 217in committees, 209of Fed, 3, 33of Treasury, 33

marketactive interbank, 250–51challenges for, 21–23common, 234effi cient, 245Fed and, 11fed funds, 6free- , 227–28

guidance to, 239open, 38

market prices, 245market value, 96marketing, 71maturity mismatch, 37–39MBS. See mortgage- backed securitiesMcCallum, Bennett, 202McKay, Alisdair, 120Melosi, Leonardo, 269Meltzer, Alan, 2Melvin, Michael, 182Merkel, Angela, 221, 225Michaelis, Henrike, 192Michelson- Morley moment, 104–8, 121–23military power, 234models

Bullard on, 269–70Cochrane on, 270comparison of, 82–83, 190–91, 194, 199,

263–64confi dence in, 86regime- switching, 257steady state, 262–63

monetarism, 1, 105, 126, 202monetarist theory, 91monetary analysis, 202n3monetary control, 169Monetary History (Friedman and Schwartz),

126monetary policy framework, 162–68monetary transmission mechanism, 30monetary- fi scal interactions, 167–68money, 24–25, 139–41

See also currency; electronic moneymoney growth, 196–97money- market

rates of, 28–30, 29fshort- term, 14–15

mortgage- backed securities (MBS), 3–4, 40, 250, 255

moving average, 78fMPS model, 196Mt. Gox, 135n8Mulford, David, 184, 233Mundell- Fleming trilemma, 224mutual funds, 20

NAIRU. See non- accelerating infl ation rate of unemployment

Nakamura, Emi, 120narrow bank, 181–82national sovereign bonds, 229

Index 305

natural rate, 81–88natural real interest rate, 45–46

growth of, 49–50medium- run, 57short- run, 47

Nazis, 228negative short- run impact, 95Nelson, Bill, 196–97Nelson, Edward, 81–82, 125–26Nelson, William, 40–42“neo- Fisherian” hypothesis, 94neutral equilibrium real short- term interest

rate. See r- starNew Keynesian- style model (NS), 81–82,

91–93, 191–92assumptions of, 188–89challenge to, 99–101implications of, 108–9nonlinear version of, 113–14predictions of, 94Robustness Principal to, 113

New York Fed, 23New York Times, 51–52Nicolaisen, Jon, 1699/11, 24nominal anchor, 162–63nominal interest rate, 62, 81, 84–85

buff er for, 253infl ation on, 114–17transitory increases in, 116–17

non- accelerating infl ation rate of unemploy-ment (NAIRU), 53, 67–68, 236

nonrobustness, 120normalization, 193, 251–52Norman, Montagu, 241NS. See New Keynesian- style model

Obstfeld, M., 140Occam’s razor, 98–102Ohanian, Lee E., 64–65, 85–86, 88Okun’s law, 53–54Old Keynesian models, 188–89, 191–92Olympic Games, 221–22omitted variable bias, 54–55OMT. See Outright Monetary TransactionsON RRP. See overnight reserve repurchaseOrdoliberals, 228output gap

long- run, 53–54measurement of, 54

Outright Monetary Transactions (OMT), 225overnight reserve repurchase (ON RRP),

19–20, 35

package approach, 193–94Papell, David, 196paper currency, 149–50, 182–83

CBDC and, 154–55GDP and, 154

payment systems, 134–36central, 131–32effi ciency of, 133Fed on, 131–32improvement of, 132–33payment fi nality of, 133reliable, 179safety of, 132speed of, 132–33ubiquity of, 132unbanked people with, 179

pecuniary externalities, 140–41Phelps, Ned, 189Phillips curve, 65–68, 66f, 67f

disappearance of, 71existence of, 187on infl ation, 104relationship of, 48, 54–55stability of, 69–70support for, 79

pi- star, 84Plaza Accord, 200Plosser, Charles, 2n1, 24–25, 32, 274

on balance sheet, 35–36, 39–40on dot plan, 275on rules, 275–76on tail risks, 276–77

policybenchmarks of, 86–87for central banks, 205challenges for, 15committees on, 207–10conference on, 187–88credit, 4, 37–38debt- fi nanced, 4fi nancial system regulatory, 79–80implementation of, 5on institutions, 2on interest rate, 64investment, 9of macroeconomics, 237macro- prudential, 239–40measuring of, 49micro- prudential, 239–40off - budget, 8, 15outcome- based, 259–62public, 244–45on QE, 255

306 Index

regulatory, 281–82rule prescriptions of, 203–4rules in, 201–3rules- based, 193stabilization, 260–61strategy of, 165–67supervisory, 271thresholds for, 265trust in, 102See also regulations

policy makers, 194, 237policy reform

Bullard on, 245, 271–72communications for, 241governance of, 240–41Saphir on, 244strategy for, 238–39tools for, 239–40Warsh on, 244–47See also Federal Reserve, US

political independence, 16politics, 10, 227, 244Powell, Jerome H., 24premiums

asset, 32–33, 37equity, 85–86liquidity, 33

priceof money, 140–41setting of, 12

price index, US, 163n64, 166–67price level model, 112f

fi scal theory of, 119–20, 124, 268–69theory of, 92–93

“price puzzle,” 98price signal, 39price stability, 84–85, 140, 159

benefi ts of, 148–49statutory, 236true, 146n19

price stickiness, 70–71, 125price- level targeting, 161

indeterminacy of, 202rule of, 164–65

pricing technologies, 71Princeton University, 221private money, 139–40

See also cryptocurrenciesprivate sector unionization rate, 70Prudentissimus, Julius Paulus, 143, 143n14

quantitative easing (QE), 3, 25, 240, 245on assets, 253–54

Cochran on, 253–54concerns of, 42, 252impact of, 4, 18–19policy on, 255value of, 250

quantitative strategy, 220quantity theory, 202

“Ramsey planners,” 2rates

increases of, 240of money- market, 28–30, 29fnatural, 81–88short, 82target of, 5–6, 30See also exchange rate; federal funds rate;

funds rate; interest rate; natural rate; private sector unionization rate; unem-ployment rate

rational expectations equilibrium, 105, 110, 118–19

real rate of interest, 83–87real- time mis- measurement, 50real- time rolling- window estimates, 57–58recession, 3, 66, 252reform. See policy reformreform bills, 13reforming banking, 79–81regimes, 257regression coeffi cient, 66–67regulations, 35Reifschneider- Williams approach, 198reserves

balance of, 19f, 21f, 27–28currency and, 24–25decline in, 18–19demand for, 5–6excess, 7growth of, 4importance of, 42interest rate and, 6–7, 10, 13–15, 24–25money and, 24–25normal for, 249–50rationing, 34requirements of, 28, 30, 35size of, 26supply and demand of, 20, 24volatility of, 28, 35

returnsto capital, 78fof debt, 103pre- tax, 77raw, 78fon savings, 76–77

policy (continued)

Index 307

revanchism, 238reverse repo facility, 183reverse repo program (RRP), 11–12, 27–28,

30, 36, 41reverse repurchase agreements, 4n2, 147n24risk management, 9risk premiums, 106, 108risks

on assets, 7n5for balance sheet, 7–10Evans on, 278–79Heller on, 277term, 254

RMSE. See root mean square errorrobustness, 196, 199

Bullard on, 267–68to disparate economic views, 190–92

Robustness Principal, 113Rogoff , K., 140rolling- window estimates, 57fRome, 143–44root mean square error (RMSE), 64–65Rosengren, Eric

on balance sheet, 252–53, 280–81on interest rates, 254–55on liquidity, 283–84on r- star, 258–59on rules, 270–71on strategy, 261–62on stress tests, 266–67on tail risks, 278

Rotemberg, Julio, 125–27RRP. See reverse repo programr- star, 45–49

adjusting, 55assessment of, 247Bullard on, 256–58Cochrane on, 256concerns about, 62–121, 76decline of, 57–59discussion of, 199, 205disparate views on, 192–93estimates of, 50f, 51–52, 51f, 52f, 128–29,

258–59impact of, 256–57inconsistencies of, 54flevel of, 62, 79long- run, 55–56low, 236measurement of, 81medium- run, 50–51Rosengren on, 258–59sensitivity of, 53time- varying, 52

view on, 63–71See also Laubach- Williams medium- run

r- star estimatesrules, 82–83, 86–87

for benchmarks, 203–6, 210–11benefi ts of, 220Bullard on, 272–73committee decisions compared to, 210compromises in, 214contingents of, 220decisions compared to, 206as law, 215learning, 129–30Levin on, 218–20mega- , 198Plosser on, 275–76in policy, 201–3prescription of, 210–11on purchases, 255Rosengren on, 270–71strategies of, 214–15See also Taylor rule; Yellen- Taylor rule

Russia, 234Russian oligarchs, 226

Safaricom Ltd., 149n28sample periods, 57–58Samuelson, Paul, 190–91Sanches, D., 137n11, 139, 169Sannikov, Yuliy, 125Saphir, Ann, 244Sarkozy, Nicolas, 221savings, 76–77savings- investment relationship, 47Sayers, Richard, 206SBBS. See sovereign bond- backed securitySchembri, Larry, 184, 200Schmitt- Grohe, Stephanie, 110–11Schorfh eide model, 57Schwartz, Anna, 126secular stagnation, 64, 76–80, 261secure store of value, 155

constant nominal value, 156interest- bearing CBDC, 158–59stable real value, 157

securitiesborrowing, 11fi nancially engineered, 32fi nancing, 19–20government, 31–32impacts on, 37mortgage- backed, 18private, 31–32private- sector, 4

308 Index

reduction of, 20–22short- term, 32

SEP. See Summary of Economic ProjectionsSeru, Amit, 81Shadow Open Market Committee, 2Shin, Hyun- Song, 55shocks, 82, 235

booms, 245busts, 245damage from, 236–37on economy, 236–37impact of, 255–56monetary policy, 114–17risk- premium, 58–59transitory demand, 71

short- run components, 72–75, 72f, 73f, 74f, 75f, 76f

short- run demand management, 79Shultz, George, 39, 189, 217Siklos, Pierre, 186Silicon Valley, 235Silk Road, 134n7Smets- Wouters model, 56–58, 57fSmith, Adam, 142SNB. See Swiss National Banksociology, 128Solow, Robert “Bob,” 190–91sovereign bond- backed security (SBBS),

229–30sovereign bonds, 224sovereign debt crisis, 269Spain, 73–74spreads, 30stability factors, 7stabilization tool, 62–64stable quiet infl ation, 93stable unit of account, 159–62Stanford University, 192start- ups, 79–80steady state, 111–12, 112fsteady- state equilibrium, 113Steinsson, Jon, 120Stock, James, 65–66, 69stocks, 40

price of, 124–25settlement cycle for, 133n4

Stock- Watson forecasts, 65–66straitjacket commitments, 223–25strategies, 5–6

Evans on, 259–60, 263–64for reform, 238–39

structural response functions, 99–100Sullivan, Daniel G., 70–71

Summary of Economic Projections (SEP), 252, 273–74

Summers, Lawrence, 50–52sunspots, 92, 98–99supply and demand, 97Supreme Court, US, 215surplus, 103Sveriges Riksbank, 144n16, 152Swanson, Eric T., 106Swiss National Bank (SNB), 1, 9systematic measurement bias, 160–61,

160n54systematic policy evaluation, 194systemic risks, 170, 240

tail risks, 235n1, 239, 276–78“taper tantrum,” 21tapering, 21tax policy, 66tax revenue, 223–24Taylor, John B., 21, 23, 32, 49

on balance sheet, 35, 40, 42–43on models, 196–200, 214research of, 202

Taylor rule, 53–54, 111–12, 165–66, 192alternates for, 260benchmark of, 203strategy with, 218–19

T- bill, 30Teal Books, 203–4, 266–67technology, 197term structure models, 31Tetlow, Robert, 196time- series methods, 48, 53Tobin, Jim, 188–89tokens, 150–52TPS. See Treasury infl ation- protected

securitiesTrabandt, Mathias, 108trade, 234Treasuries

bills from, 58Bullard on, 284Cochrane on, 284Evans on, 284holdings of, 4n3interest rates on, 34long- term, 254portfolio of, 10real rate of, 76–77, 77fselling of, 4short- term, 7n5value of, 96

Treasury Department, US, 3, 27–30, 240

securities (continued)

Index 309

Treasury infl ation- protected securities (TIPS), 128

Treasury securities, 3, 18trends

forward looking, 239population growth, 253productivity growth, 85, 253total facot, 236n2volatility of, 257

true price signal, 148Trump, Donald, 234Turkey, 103

unemployment rate, 42, 53–54, 67f, 68f, 69fon infl ation, 65–67labor force, 257–58trends in, 160–61See also layoff s; wages

unionization, 70United Kingdom, 89, 234United States (US), 89

economy of, 64, 90fhistory in, 220interest rates in, 103–4

University of Rochester, 1Uribe, Martin, 110–11US. See United States

values, 48venture community, 242Vissing- Jorgensen, Annette, 31Volcker, Paul, 127–28, 188–89, 215Von Wachter, Till, 70–71

wagesnominal, 70–71rigidities of, 85

Wall Street, 18Walsh, Carl, 81Warsh, Kevin, 244–47Watson, Mark, 65–66, 69Weber, Max, 222Weymuller, Charles- Henri, 34Wieland, Volker, 52–57, 86, 192, 196

on euro crisis, 231–32on natural rate, 81–83, 87–88

Wilhelmsen, B. R., 52–53Williams, John C., 47–55, 58, 82–83, 106, 198Wolters, Maik, 55–57Woodford, Michael, 13, 125–27World War II, 227–28Wright, Jonathan, 106, 108, 140

Yellen, Janet, 51–54, 59, 83–84, 128, 192Yellen- Taylor rule, 54yield curve, 251

zero interest rates, 92zero lower bound (ZLB), 62–64, 93–94, 198

alternative to, 254as binding, 117–20Bullard on, 260–63Cochrane on, 123–29, 179–80, 260fear of, 102fi scal multiplier in, 117–20, 118f, 119fquiet, 99–102, 105–6, 123–30, 262targeting, 252–53, 258–59