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Working Paper
Results of a study of the stability of cointegrating relations comprised of broad monetary aggregates
There is strong evidence of a stable ?money demand? relationship for MZM and M2 through the 1990s. Though the M2 relationship breaks down somewhere around 1990, evidence has been accumulating that the disturbance is well characterized as a permanent upward shift in M2 velocity that began around 1990 and was largely over by 1994. This paper?s results support the hypothesis that households permanently reallocated a portion of their wealth from time deposits to mutual funds. This reallocation may have been induced by depository restructuring, but it could also be explained by appropriately ...
Journal Article
Assessing real interest rates
An assessment of the usefulness of a real-interest-rate guidepost for communicating long-term monetary policy intentions to the public. The author contends that because of inherent complexities in the relationship between real interest rates and policy objectives, a policy framework expressed in terms of ultimate objectives would be more informative, particularly if it included a nominal anchor on the price level.
Journal Article
Recent behavior of velocity: alternative measures of money
An examination of the relationship between velocity and interest rates for two alternative measures of money, and an analysis of the effects of thrift restructuring on money demand.
Journal Article
Federal funds futures as an indicator of future monetary policy: a primer
An analysis of how federal funds futures markets are efficient processors of information concerning the future path of the fed funds rate and a discussion of some related implications for central-bank policymaking.
Journal Article
Does dollar depreciation matter: the case of auto imports from Japan
The Japanese auto industry is used as a case in point to illustrate some of the ways in which firms operating in export markets cope with exchange-rate changes.
Journal Article
Measures of corporate earnings: what number is best?
Revelations of corporate fraud in 2002 shook the public's confidence in financial reporting and led to calls for reform. Without credible, transparent, and comparable financial information, investors, auditors, and others cannot make decisions that are essential to the efficient functioning of the economy. But while rules can be improved, it is not possible to achieve a rigid standard that applies uniformly to every company. This Economic Commentary explains why.
Journal Article
Public pensions under stress
The financial crisis has made it all too clear that regulators failed to see into the dark corners of the financial system. With that in mind, the Federal Reserve Banks of Cleveland and Atlanta have formed a Financial Monitoring Team to study pension funds and municipal finance with an eye toward implications for the wider economy and financial system. What concerns should we have? In this article and other articles from this spring issue of Forefront, we explain where risks could be building and how reforms might help forestall their impact on the broader economy and financial system.
Working Paper
Recovering market expectations of FOMC rate changes with options on federal funds futures
This paper demonstrates how options on federal funds futures, which began trading in March 2003, can be used to recover the implied probability density function (PDF) for future Federal Open Market Committee (FOMC) interest rate outcomes. The discrete nature of the choices made by the FOMC allows for a very straightforward recovery of the implied PDF using ordinary least squares (OLS) estimation. This simple recovery method stands in contrast to the relatively complicated PDF recovery techniques developed for options written on assets such as equities, foreign exchange, or commodity futures ...
Journal Article
The M2 slowdown and depository intermediation: implications for monetary policy
An examination of credit flow rechanneling away from depository institutions over the past decade in response to evolving financial markets and regulatory structure, and a discussion of how this trend has complicated monetary policymaking.
Journal Article
Nominal income targeting
A description of the Federal Reserve monetary policy framework, with a suggestion that a multiyear nominal income target be viewed as a practical extension of current policy procedures.