Index

adaptive expectations, 100–101 Bullard on, 251–52 aggregate demand, 48, 96 of central bank, 164–65 curve of, 47, 54–55 Cochrane on, 34–35, 40, 43, 249–50, 284 depression of, 227 composition of, 14–15, 23, 27 impact of, 64 concerns for, 32 relationship of, 45–46, 46f constraints on, 15 aggregate savings, 46 Dotsey on, 36–37 AIG, 4 Duffi e on, 34–35 Alitalia, 85 on economy, 255 American Finance Association, 125 Evans on, 250–51 America’s Bank (Lowenstein), 207 Fisher, P., on, 37–38 artifi cial intelligence, 235 FOMC on, 13–14 asset prices, 238, 245 future for, 22–25 assets as hedge fund, 8 on balance sheet, 3 impacts on, 16–20 business, 77, 79 institutions for, 3 Cochrane on, 255 Krishnamurthy on, 37, 39 government, 31–32, 31f, 77, 123 liability side of, 4 long- dated, 38 Liesman on, 42 long- term, 13 Nelson, W., on, 40–42 premiums on, 32–33, 37 operating regime of, 8 purchases of, 3 Plosser on, 35–36, 39–40 QE on, 253–54 presentations on, 254–55 risky, 7n5 purposes for, 8 safe, 7, 228–29, 257–58, 282–83 reduction of, 20–22 tax on, 11 risks for, 7–10 trading of, 236 Rosengren on, 252–53, 280–81 Atkeson, Andrew, 64–65 Shultz on, 39 authorities, 2 size of, 5–7, 14–15, 17, 23–35 discretionary, 16 structure of, 3–4 See also fi scal authorities Taylor on, 35, 40, 42–43 with Treasury, 27–30 Bagehot, Walter, 242 wide-open, 250 Bai, Jennie, 34 band, 24 bail- ins, 222, 226 band pass fi lter, 72–73 bailouts, 8–9, 222, 224–25, 233 Bank of Canada, 198 balance sheet, 2, 17t Bank of England, 152, 215, 219, 240, 247 adjustments to, 240 Bank of India, 220 asset side of, 3 Bank of Israel, 210 298 Index

Bank of Japan, 40, 167–68 Bullard, James, 130, 198 banks on balance sheet, 251–52 interest to, 5, 9 on communication, 272 loans from, 18 on forecasts, 280 losses of, 223–24 on models, 269–70 presidents of, 207 on policy reform, 245, 271–72 stress tests at, 265–66 on robustness, 267–68 See also central bank on r- star, 256–58 Barrdear, John, 152 on rules, 272–73 Bear Stearns, 4 on safe assets, 282–83 behavioral economics, 187–88 on strategy, 255 benchmark on thresholds, 265 defi nition of, 219–20 on Treasuries, 284 policy, 86–87 on ZLB, 260–63 rules for, 203–6, 210–11 business, 77, 79 of Taylor rule, 203 See also start- ups Benhabib, Jess, 110–11 business cycle Bernanke, Ben, 13, 21, 255–56 stabilization of, 63–64 Bewley, Truman, 161 traditional, 72 Beyer, Robert, 52–54 “big bazooka,” 225 Calvo parameter, 114–15 Bismarck, 233 cameralism, 227–28 , 134n7, 151n34, 151n35, 182 Cameron, David, 225 See also cryptocoin Canada, 214 Bitcoin Unlimited, 135n9, 138, 142 capital, 78f, 224 Blanchard, Olivier, 165n66 allocation of, 62–63 , 133 business, 77, 79 Blue Books, 203–4 private, 85–86 Board of Governors, 9, 12–13, 108 capital fl ow management, 187–88 Bogdanova, Bilyana, 55 capital investments, 79–80 boilerplate language, 196–97 Carnegie- Rochester Conference Series on bonds, 4n3, 230 Public Policy, 2 demand for, 103 CBDC. See central bank digital currency development, 8 CBO. See Congressional Budget Offi ce government, 85–86 central bank, 2, 97 investors of, 241 balance sheet of, 164–65 joint liability, 225 challenges of, 219–20 junior, 229, 233 comparison of, 200 long, 241 deviation of, 55 senior, 229, 233 digital currency and, 143–71 Bordo, Michael evolution of, 186 on payments, 181, 185–86 future of, 242–43 on strategy, 220 interest rate of, 62, 71–72 Boskin, Michael, 217 policies of, 205 Brazil, 103 reputations of, 168 Bretton Woods, 168, 210 responsibilities of, 167–68 Brexit, 222, 233–34 central bank digital currency (CBDC), 144 Brunner, Karl, 1–2 account- based, 152 Brunnermeier, Markus benefi ts of, 148–49, 168 on euro crisis, 232–34 CBDC accounts, 150–51 on ZLB, 125 CBDC tokens, 150 Brussels, 229–30 challenges for, 170–71 budget, 91, 110–11 cost of, 146 Index 299

design of, 146–47 Consumer Financial Protection Bureau, 9, 10 fi scal authorities and, 145–46 Conti- Brown, Peter, 240–41 on infl ation, 146–47 contingency planning, 220 interest rate on, 164 contracts, 70–71 interest- bearing, 158–59, 163 corridor, 6–7, 24 paper currency and, 154–55 cost- benefi t trade- off , 37 strategy of, 153 credit “channel system,” 6 allocation of, 8, 24–25 China, 183 and, 137–38 CHOICE Act, 198 policy on, 4, 37–38 Christiano, Lawrence, 108, 113, 127–28 credit cards, 146 Clarida, Richard, 128–30 credit rate, 6 closed- economy model, 246 credit risk, 254 Cochrane, John, 191–92 cryptocoin, 134 on assets, 255 cryptocurrencies, 136, 180 on balance sheet, 34–35, 40, 43, 249–50, control over, 183 284 credit and, 137–38 challenge to, 120–21 design of, 183–84 on forecasts, 265–66 on government, 141–42 on groupthink, 265 privacy with, 181 on models, 270 security of, 184–85 on natural rate, 83–85 value of, 138–39 on QE, 253–54 cryptography, 137n12 on r- star, 256 Cukierman, A., 54–55 on strategy, 261 currency theories of, 104–6, 112–13 competition of, 141 on Treasuries, 284 demand of, 5, 18 on ZLB, 123–29, 179–80, 260 Evans on, 268–69 Committee. See Federal Open Market growth of, 4 Committee history of, 143–44 committees reserves and, 24–25 benefi ts of, 209–10, 210n20 See also paper currency communication in, 208–9 curve fail, 31 cooperation in, 246 cybersecurity, 183 decision process of, 207, 210, 264 Cyprus bail- in, 222, 226–27 deliberations in, 209–10 double votes in, 216 data mandates in, 209 dependent on, 219–20 on policies, 207–10 observable, 57 principles of, 216–17 Davis, Steve, 70–71 role of, 207–10 Deauville decision, 230 size of, 215–16 debt strategy of, 214 government, 38, 77, 180 systems of, 208 long- term, 95–96, 217 See also Federal Open Market Committee market value of, 96 Commodity Futures Trading Commission, restructuring of, 223, 226 153n38 return of, 103 communication, 241–42 short- term, 31–32, 91 Congress, US, 8–9 debt restructuring, 223 concerns of, 37–38 debt- to- GDP ratio, 123 on laws, 244 Decentralized Autonomous Organization, Congressional Budget Offi ce (CBO), 123–24 135n8 constant linear multiplier, 118–19 defl ation, 87, 125 300 Index

Del Negro model, 57 resilience of, 236 demand curve, 225–26 shocks on, 236–37 democracy, 2, 209–10, 251 US, 64, 90f depository services, 25 Eichenbaum, Martin diabolic loop, 228–29 on natural rate, 85–86 digital currency on regulatory policy, 281–82 central bank and, 143–71 on ZLB, 127–30 concerns for, 179–80 electronic money, 102 implementation of, 184–86 equilibrium rate, 47 interest rate on, 181–82 long- run, 48, 82 discount rates, 103–4, 189–90 medium- run, 48–49 disinfl ation, 188–89, 198 equilibrium real interest rate, 45–46 dispersion, 28–29 decline of, 51 distributed , 133–36, 136n10 impacts on, 55 distributed ledger technology (DLT), 150 medium- run nature, 47–48 distribution, 71 short- run, 47 diversifi cation, 9 time horizons on, 47 dividends, 123–24 time-varying, 59 DLT. See distributed ledger technology equilibriums DNWR. See downward nominal wage rigidity learnable, 129 Dodd- Frank, 244 multiple, 110–13 dominant economic framework, 246 value of, 109–10 dominant model, 246 See also rational expectations equilibrium dot plan, 275 Erceg, Chris, 127 Dotsey, Michael ESBies. See European safe bonds on balance sheet, 36–37 Ethereum, 138, 142, 150n32 on natural rate, 81–83 euro, 48, 52–53 downward nominal wage rigidity (DNWR), development of, 233 160–61 dollar into, 179 Draghi, Mario, 58–59, 221–22, 225 The Euro and the Battle of Ideas DSGE. See dynamic stochastic general (Brunnermeier and James), 221 equilibrium euro crisis, 228–29 Duca, John, 185 Brunnermeier on, 232–34 Duffi e, Darrell, 28, 30, 34–35 Mulford on, 233 dynamic stochastic general equilibrium Wieland on, 231–32 (DSGE), 47, 152, 191 Eurobonds, 225, 229, 233 Dyson, Ben, 152–53 Europe, 89, 103 challenges in, 227 easing, 87 continental, 234 ECB. See European Central Bank European Central Bank (ECB), 8–9, 167, econometric derivation, 205 217–18 econometric estimates, 94–95 European Commission, 221 economy European Council, 221 balance sheet on, 255 European junior bond, 229–30 challenges for, 247 European safe bonds (ESBies), 229–30 closed- economy model, 246 European senior bond, 229–30 comparative conditions of, 211 European Union, 227 growth of, 18, 42 Evans, Charles, 199, 265 infl ation on, 260–61 on accountability, 272–73 innovation economy, 235 on balance sheet, 250–51 interest rates on, 34, 89–90, 189–90 on currency, 268–69 new conditions of, 205–6 on forecasts, 279–80 politics and, 10, 227, 244 on purchases, 255–56 Index 301

on risks, 278–79 reform in, 271–72 on strategy, 259–60, 263–64 regulations of, 239–40 on Treasuries, 284 responsibilities of, 237 ex post patches, 101–2 role of, 12–16 exchange staff of, 203–4 effi cient medium of, 146, 149–55 strategy of, 197, 239, 255 fi xed rates of, 224 trust in, 181 fl exible rate of, 189 Federal Reserve Act, 15, 84–85, 197 government on, 136–37 Federal Reserve Board of Governors, 63, 65, pegged rates of, 224 189, 193–94 stability of, 136–37 Federal Reserve Board San Francisco, 50–51 exchange rate federal structure, 227 concerns of, 194 Fernández- Villaverde, Jesús, 137n11, 139, volatility of, 224, 252 169, 180–85 fi nancial accelerator, 191, 199 federal funds rate, 21f, 55 Financial CHOICE Act, 193–94 adjustment of, 208 fi nancial crisis, 16–17, 170–71, 205 behavior of, 202–3 Federal Reserve and, 238 futures market of, 106–8, 107f impact of, 220 impact of, 205n12 predicting, 266 long- term, 252 recovery of, 260 Federal Open Market Committee (FOMC), See also recession 5–6, 12, 40, 65, 162n60, 162n61 fi nancial friction, 199 on balance sheet, 13–14 fi nancial institutions, 193 communications in, 209 fi nancial market, 3, 238 decisions from, 201 fi nancial market utilities (FMUs), 147, 153 diversity in, 215 fi nancial stability, 14–15, 31, 41, 228 fl exibility in, 209 FINRA rule requirements, 134–35 framework of, 207–8 fi scal authorities, 9, 16, 39–40, 167–68 goals of, 207 CBDC and, 145–46 impact of, 217 fi scal foundations, 103–4 intentions of, 247 fi scal multiplier, 117–20, 118f, 119f strategy of, 21–23, 193, 198–99 fi scal theory, 92–93 Federal Reserve, US (Fed) Fischer, Stanley, 189–92, 214–20 authority of, 244 Fisher, Irving, 85 challenges of, 245 Fisher, Peter, 23, 181, 184–85 communications of, 244 on balance sheet, 37–38 contribution from, 8 proposal of, 218 credibility of, 242 Fisher equation, 63–64 fi nancial crisis and, 238 Fisherian, 98, 117 framework of, 239 fl oor system, 6–7, 24, 41–42 functions of, 239 control of, 13 future of, 254–57, 272–73 fi rm, 11–12 groupthink at, 245 FMUs. See fi nancial market utilities independence of, 2–3, 9 FOMC. See Federal Open Market Committee liquidity support from, 24 forecast mandates of, 3, 33 Bullard on, 280 market and, 11 challenges to, 261 notes from, 18 Cochrane on, 265–66 outlook of, 237 confi dence interval, 237 on payment systems, 131–32 Evans on, 279–80 on population growth, 261 of GDP, 108 on productivity growth, 261 of Green Book, 108 302 Index forecast (continued) Great Depression, 255–56 of infl ation, 64–67, 88 Great Infl ation, 168 point, 265–66 Great Moderation, 190, 265–66 of real rate of interest, 86–87 Great Recession, 62, 104–5, 109, 196 traits for, 237 Greece, 221, 223, 226 unanimity of, 236 Green Book, 32, 108 See also Stock- Watson forecasts Greenspan, Alan, 163n63, 202–3, 220 forecast targeting, 148 gross domestic product (GDP), 46, 59–60 foreign banks, 10, 11 borrowing against, 104 framework, 15, 23–24, 35–36 forecasts of, 108 France, 73–74 growth rate of, 49, 86–87 attack on, 228 paper currency and, 154 straitjacket commitments of, 223–24 patterns with, 72–73 strategy of, 222–25 price index of, 166–67 war in, 228 groupthink, 245–46, 264–65 FRB/US model, 196, 198, 245 Frederick the Great, 227–28 Hansen, Gary D., 71–72 free capital fl ows, 224 Hayek, F. A., 136–37, 139–40 frictions, 95, 97, 101–2 hedge fund, 8 Friedman, Milton Heller, Robert, 198, 215, 220, 277 advocacy of, 205n14, 206n14 high equity premium, 85–86 on natural rate, 84 high- quality liquid assets (HQLA), 41 on ZLB, 126, 141n13, 146, 188–89 Hodgson, Graham, 152–53 funds rate, 5, 35–36, 40–41 Hodrick, Laurie, 180, 183 average of, 28 Hodrick, Robert “Bob,” 179, 182, 183 average real federal, 58 Hofmann, Boris, 55 control of, 12–13 Holston, K., 48, 51 prescriptions of, 59–60 honeypot, 39 short-term risk-free, 6 Hoover Institution, 1, 235 See also federal funds rate Hoover Institution Monetary Policy Confer- futures market, 106–8, 107f ence, 236 House Financial Services Committee, 193–94 Gabaix, Xavier, 114 housing sector, 4 Gabaix model, 114, 119f HQLA. See high- quality liquid assets Gabaix- style behavioralism, 114 Hyperledger, 133 Garnier, J., 52–53 GDP. See gross domestic product IMF. See International Monetary Fund geopolitical security, 234 IMF–World Bank meetings, 187–88 Germany, 52–53, 73–74 incentives, 40 attack by, 228 independence federal structure in, 227 compromising of, 10 strategy of, 222–25 of Fed, 2–3, 9 war in, 227–28 independent agencies, 25 gold standard, 187–88 infl ation, 42, 81 government causes of, 43 assets of, 31–32, 31f, 77, 123 CBDC on, 146–47 bonds of, 85–86 dangers of, 64 on cryptocurrencies, 141–42 decline in, 94–95 debt of, 38, 77, 180 on economy, 260–61 on exchange, 136–37 estimate of, 55 securities of, 31–32 forecasts of, 64–67, 88 tax revenue of, 223–24 goals for, 168n70 government- sponsored enterprises, 20 impact on, 252 Great Convergence, 198 interest rate on, 94–98, 95f, 96f, 103–4 Index 303

in Japan, 130 international fi nancial system, 25 measure of, 236 International Monetary Fund (IMF), 229–30 nominal interest rate on, 114–17 international spillovers, 239 numerical objectives of, 162–63 “intertemporal,” 91 outcomes of, 88 intervals, 56–57 personal consumption expenditures, 53–54 intraday volatility, 36–37, 41 Phillips curve on, 104 investments, 77, 79 response of, 115f demand on, 46, 55 stability of, 91–92, 100–101 policy on, 9 target rate of, 111, 199 IOER. See interest on excess reserves theories of, 90 IOR. See interest rate paid on reserves unemployment rate on, 65–67 Israel, 216 infl ation gap, 196 Italy, 86 infl ation targeting, 214–15 infrastructure initiatives, 8 Jacobson, Louis S., 70–71 innovation economy, 235 James, Harold, 221 institutions Japan, 89, 99, 103, 200 for balance sheet, 3 future for, 263 depository, 35–36 infl ation in, 130 design of, 39–40 JEC. See Joint Economic Committee non-depository, 35–36 Johansen, Benjamin, 113 policy on, 2 Joint Economic Committee (JEC), 272 interest on excess reserves (IOER), 20, 23, Journal of Money, Credit, and Banking and the 30, 41 Journal of Monetary Economics, 1 interest rate Journal of Political Economy, 189 average, 82 Judd, Kenneth, 129 to banks, 5, 9 on CBDC, 164 Kahn, George, 24 of central bank, 62, 71–72 Keister, Todd, 25 control of, 34 Kenya, 149, 153 on digital currencies, 181–82 Keynesian stimulus, 227 economy on, 34, 89–90, 189–90 Keynesian- style model, 48 fl exible-price, 81–82 Kim, Don H., 106, 108 future, 120 Kohn, Donald, 24, 203–4 infl ation on, 94–98, 95f, 96f, 103–4 Krishnamurthy, Arvind, 37, 39 long- run, 81 Krugman, Paul, 51–52 market- determined, 23–24, 26 Kumhof, Michael, 152 negative, 199 neutral, 208–9 Lagos, R., 140 pass- through of, 43 Lagos and Wright model, 139 policies of, 64 Lalonde, Robert J., 70–71 reserves and, 6–7, 10, 13–15, 24–25 Landau, Jean Pierre, 221 response of, 115f Laubach, Thomas, 47–52, 179 Rosengren on, 254–55 Laubach-Williams medium-run r-star esti- short- term, 24, 201–2 mates, 53, 58 as stabilization tool, 62–64 Laubach- Williams method, 54 steady- rate, 48 layoff s, 70–71 for Treasury, 34 learning model, 118–19 in United States, 103–4 Leeper, E. M., 269 See also equilibrium real interest rate; legislation, 13 natural real interest rate; nominal Levin, Andrew interest rate on natural rate, 86–88 interest rate paid on reserves (IOR), 6–7, on rules, 218–20 9–10, 12–13, 169 on ZLB, 123–24, 127, 166, 181–85 304 Index liabilities guidance to, 239 on balance sheet, 4 open, 38 joint, 225, 229, 233 market prices, 245 managed, 189–90 market value, 96 short-dated, 38 marketing, 71 solidarity against, 224 maturity mismatch, 37–39 value of, 224–25 MBS. See mortgage- backed securities LIBOR, 41 McCallum, Bennett, 202 Liesman, Steve, 42 McKay, Alisdair, 120 Foundation, 133 Melosi, Leonardo, 269 liquidity Meltzer, Alan, 2 of bail- ins, 226 Melvin, Michael, 182 benefi ts of, 34 Merkel, Angela, 221, 225 problems with, 225–26 Michaelis, Henrike, 192 Rosengren on, 283–84 Michelson- Morley moment, 104–8, 121–23 support from, 18 military power, 234 liquidity coverage ratio rule, 34–35, 41 models Lockhart, Dennis, 279 Bullard on, 269–70 London School of Economics, 206 Cochrane on, 270 long- run components, 72–75, 72f, 73f, 74f, comparison of, 82–83, 190–91, 194, 199, 75f, 76f 263–64 long- term repos, 11 confi dence in, 86 Lowenstein, Roger, 207 regime-switching, 257 Lucas, Robert E., Jr., 69–70, 109–10 steady state, 262–63 monetarism, 1, 105, 126, 202 Maastricht Treaty, 224–27 monetarist theory, 91 battle lines during, 228 monetary analysis, 202n3 negotiation of, 228–29 monetary control, 169 macro evidence, 42 Monetary History (Friedman and Schwartz), macro models, 36–37 126 macroeconomics, 187–88 monetary policy framework, 162–68 aggregate conditions of, 238 monetary transmission mechanism, 30 challenges to, 259–60 monetary- fi scal interactions, 167–68 fl uctuations of, 71–76 money, 24–25, 139–41 goals of, 211 See also currency; electronic money instability of, 169 money growth, 196–97 microfoundations of, 239 money-market modern, 256–57 rates of, 28–30, 29f policy of, 237 short- term, 14–15 stabilization of, 71–72 mortgage- backed securities (MBS), 3–4, 40, variables of, 63–64 250, 255 mandates, 217 moving average, 78f in committees, 209 MPS model, 196 of Fed, 3, 33 Mt. Gox, 135n8 of Treasury, 33 Mulford, David, 184, 233 market Mundell- Fleming trilemma, 224 active interbank, 250–51 mutual funds, 20 challenges for, 21–23 common, 234 NAIRU. See non- accelerating infl ation rate of effi cient, 245 unemployment Fed and, 11 Nakamura, Emi, 120 fed funds, 6 narrow bank, 181–82 free- , 227–28 national sovereign bonds, 229 Index 305 natural rate, 81–88 package approach, 193–94 natural real interest rate, 45–46 Papell, David, 196 growth of, 49–50 paper currency, 149–50, 182–83 medium- run, 57 CBDC and, 154–55 short- run, 47 GDP and, 154 Nazis, 228 payment systems, 134–36 negative short- run impact, 95 central, 131–32 Nelson, Bill, 196–97 effi ciency of, 133 Nelson, Edward, 81–82, 125–26 Fed on, 131–32 Nelson, William, 40–42 improvement of, 132–33 “neo- Fisherian” hypothesis, 94 payment fi nality of, 133 neutral equilibrium real short- term interest reliable, 179 rate. See r- star safety of, 132 New Keynesian- style model (NS), 81–82, speed of, 132–33 91–93, 191–92 ubiquity of, 132 assumptions of, 188–89 unbanked people with, 179 challenge to, 99–101 pecuniary externalities, 140–41 implications of, 108–9 Phelps, Ned, 189 nonlinear version of, 113–14 Phillips curve, 65–68, 66f, 67f predictions of, 94 disappearance of, 71 Robustness Principal to, 113 existence of, 187 New York Fed, 23 on infl ation, 104 New York Times, 51–52 relationship of, 48, 54–55 Nicolaisen, Jon, 169 stability of, 69–70 9/11, 24 support for, 79 nominal anchor, 162–63 pi- star, 84 nominal interest rate, 62, 81, 84–85 Plaza Accord, 200 buff er for, 253 Plosser, Charles, 2n1, 24–25, 32, 274 infl ation on, 114–17 on balance sheet, 35–36, 39–40 transitory increases in, 116–17 on dot plan, 275 non-accelerating infl ation rate of unemploy- on rules, 275–76 ment (NAIRU), 53, 67–68, 236 on tail risks, 276–77 nonrobustness, 120 policy normalization, 193, 251–52 benchmarks of, 86–87 Norman, Montagu, 241 for central banks, 205 NS. See New Keynesian- style model challenges for, 15 committees on, 207–10 Obstfeld, M., 140 conference on, 187–88 Occam’s razor, 98–102 credit, 4, 37–38 Ohanian, Lee E., 64–65, 85–86, 88 debt-fi nanced, 4 Okun’s law, 53–54 fi nancial system regulatory, 79–80 Old Keynesian models, 188–89, 191–92 implementation of, 5 Olympic Games, 221–22 on institutions, 2 omitted variable bias, 54–55 on interest rate, 64 OMT. See Outright Monetary Transactions investment, 9 ON RRP. See overnight reserve repurchase of macroeconomics, 237 Ordoliberals, 228 macro- prudential, 239–40 output gap measuring of, 49 long- run, 53–54 micro- prudential, 239–40 measurement of, 54 off - budget, 8, 15 Outright Monetary Transactions (OMT), 225 outcome-based, 259–62 overnight reserve repurchase (ON RRP), public, 244–45 19–20, 35 on QE, 255 306 Index policy (continued) Cochran on, 253–54 regulatory, 281–82 concerns of, 42, 252 rule prescriptions of, 203–4 impact of, 4, 18–19 rules in, 201–3 policy on, 255 rules-based, 193 value of, 250 stabilization, 260–61 quantitative strategy, 220 strategy of, 165–67 quantity theory, 202 supervisory, 271 thresholds for, 265 “Ramsey planners,” 2 trust in, 102 rates See also regulations increases of, 240 policy makers, 194, 237 of money- market, 28–30, 29f policy reform natural, 81–88 Bullard on, 245, 271–72 short, 82 communications for, 241 target of, 5–6, 30 governance of, 240–41 See also exchange rate; federal funds rate; Saphir on, 244 funds rate; interest rate; natural rate; strategy for, 238–39 private sector unionization rate; unem- tools for, 239–40 ployment rate Warsh on, 244–47 rational expectations equilibrium, 105, 110, See also Federal Reserve, US 118–19 political independence, 16 real rate of interest, 83–87 politics, 10, 227, 244 real-time mis-measurement, 50 Powell, Jerome H., 24 real- time rolling- window estimates, 57–58 premiums recession, 3, 66, 252 asset, 32–33, 37 reform. See policy reform equity, 85–86 reform bills, 13 liquidity, 33 reforming banking, 79–81 price regimes, 257 of money, 140–41 regression coeffi cient, 66–67 setting of, 12 regulations, 35 price index, US, 163n64, 166–67 Reifschneider- Williams approach, 198 price level model, 112f reserves fi scal theory of, 119–20, 124, 268–69 balance of, 19f, 21f, 27–28 theory of, 92–93 currency and, 24–25 “price puzzle,” 98 decline in, 18–19 price signal, 39 demand for, 5–6 price stability, 84–85, 140, 159 excess, 7 benefi ts of, 148–49 growth of, 4 statutory, 236 importance of, 42 true, 146n19 interest rate and, 6–7, 10, 13–15, 24–25 price stickiness, 70–71, 125 money and, 24–25 price- level targeting, 161 normal for, 249–50 indeterminacy of, 202 rationing, 34 rule of, 164–65 requirements of, 28, 30, 35 pricing technologies, 71 size of, 26 Princeton University, 221 supply and demand of, 20, 24 private money, 139–40 volatility of, 28, 35 See also cryptocurrencies returns private sector unionization rate, 70 to capital, 78f Prudentissimus, Julius Paulus, 143, 143n14 of debt, 103 pre- tax, 77 quantitative easing (QE), 3, 25, 240, 245 raw, 78f on assets, 253–54 on savings, 76–77 Index 307 revanchism, 238 view on, 63–71 reverse repo facility, 183 See also Laubach- Williams medium- run reverse repo program (RRP), 11–12, 27–28, r- star estimates 30, 36, 41 rules, 82–83, 86–87 reverse repurchase agreements, 4n2, 147n24 for benchmarks, 203–6, 210–11 risk management, 9 benefi ts of, 220 risk premiums, 106, 108 Bullard on, 272–73 risks committee decisions compared to, 210 on assets, 7n5 compromises in, 214 for balance sheet, 7–10 contingents of, 220 Evans on, 278–79 decisions compared to, 206 Heller on, 277 as law, 215 term, 254 learning, 129–30 RMSE. See root mean square error Levin on, 218–20 robustness, 196, 199 mega-, 198 Bullard on, 267–68 Plosser on, 275–76 to disparate economic views, 190–92 in policy, 201–3 Robustness Principal, 113 prescription of, 210–11 Rogoff , K., 140 on purchases, 255 rolling- window estimates, 57f Rosengren on, 270–71 Rome, 143–44 strategies of, 214–15 root mean square error (RMSE), 64–65 See also Taylor rule; Yellen- Taylor rule Rosengren, Eric Russia, 234 on balance sheet, 252–53, 280–81 Russian oligarchs, 226 on interest rates, 254–55 on liquidity, 283–84 Safaricom Ltd., 149n28 on r- star, 258–59 sample periods, 57–58 on rules, 270–71 Samuelson, Paul, 190–91 on strategy, 261–62 Sanches, D., 137n11, 139, 169 on stress tests, 266–67 Sannikov, Yuliy, 125 on tail risks, 278 Saphir, Ann, 244 Rotemberg, Julio, 125–27 Sarkozy, Nicolas, 221 RRP. See reverse repo program savings, 76–77 r- star, 45–49 savings- investment relationship, 47 adjusting, 55 Sayers, Richard, 206 assessment of, 247 SBBS. See sovereign bond- backed security Bullard on, 256–58 Schembri, Larry, 184, 200 Cochrane on, 256 Schmitt- Grohe, Stephanie, 110–11 concerns about, 62–121, 76 Schorfh eide model, 57 decline of, 57–59 Schwartz, Anna, 126 discussion of, 199, 205 secular stagnation, 64, 76–80, 261 disparate views on, 192–93 secure store of value, 155 estimates of, 50f, 51–52, 51f, 52f, 128–29, constant nominal value, 156 258–59 interest- bearing CBDC, 158–59 impact of, 256–57 stable real value, 157 inconsistencies of, 54f securities level of, 62, 79 borrowing, 11 long- run, 55–56 fi nancially engineered, 32 low, 236 fi nancing, 19–20 measurement of, 81 government, 31–32 medium- run, 50–51 impacts on, 37 Rosengren on, 258–59 mortgage- backed, 18 sensitivity of, 53 private, 31–32 time-varying, 52 private- sector, 4 308 Index securities (continued) Summary of Economic Projections (SEP), reduction of, 20–22 252, 273–74 short- term, 32 Summers, Lawrence, 50–52 SEP. See Summary of Economic Projections sunspots, 92, 98–99 Seru, Amit, 81 supply and demand, 97 Shadow Open Market Committee, 2 Supreme Court, US, 215 Shin, Hyun- Song, 55 surplus, 103 shocks, 82, 235 Sveriges Riksbank, 144n16, 152 booms, 245 Swanson, Eric T., 106 busts, 245 Swiss National Bank (SNB), 1, 9 damage from, 236–37 systematic measurement bias, 160–61, on economy, 236–37 160n54 impact of, 255–56 systematic policy evaluation, 194 monetary policy, 114–17 systemic risks, 170, 240 risk- premium, 58–59 transitory demand, 71 tail risks, 235n1, 239, 276–78 short- run components, 72–75, 72f, 73f, 74f, “taper tantrum,” 21 75f, 76f tapering, 21 short- run demand management, 79 tax policy, 66 Shultz, George, 39, 189, 217 tax revenue, 223–24 Siklos, Pierre, 186 Taylor, John B., 21, 23, 32, 49 Silicon Valley, 235 on balance sheet, 35, 40, 42–43 Silk Road, 134n7 on models, 196–200, 214 Smets- Wouters model, 56–58, 57f research of, 202 Smith, Adam, 142 Taylor rule, 53–54, 111–12, 165–66, 192 SNB. See Swiss National Bank alternates for, 260 sociology, 128 benchmark of, 203 Solow, Robert “Bob,” 190–91 strategy with, 218–19 sovereign bond- backed security (SBBS), T-bill, 30 229–30 Teal Books, 203–4, 266–67 sovereign bonds, 224 technology, 197 sovereign debt crisis, 269 term structure models, 31 Spain, 73–74 Tetlow, Robert, 196 spreads, 30 time- series methods, 48, 53 stability factors, 7 Tobin, Jim, 188–89 stabilization tool, 62–64 tokens, 150–52 stable quiet infl ation, 93 TPS. See Treasury infl ation- protected stable unit of account, 159–62 securities Stanford University, 192 Trabandt, Mathias, 108 start- ups, 79–80 trade, 234 steady state, 111–12, 112f Treasuries steady- state equilibrium, 113 bills from, 58 Steinsson, Jon, 120 Bullard on, 284 Stock, James, 65–66, 69 Cochrane on, 284 stocks, 40 Evans on, 284 price of, 124–25 holdings of, 4n3 settlement cycle for, 133n4 interest rates on, 34 Stock- Watson forecasts, 65–66 long- term, 254 straitjacket commitments, 223–25 portfolio of, 10 strategies, 5–6 real rate of, 76–77, 77f Evans on, 259–60, 263–64 selling of, 4 for reform, 238–39 short- term, 7n5 structural response functions, 99–100 value of, 96 Sullivan, Daniel G., 70–71 Treasury Department, US, 3, 27–30, 240 Index 309

Treasury infl ation- protected securities (TIPS), wages 128 nominal, 70–71 Treasury securities, 3, 18 rigidities of, 85 trends Wall Street, 18 forward looking, 239 Walsh, Carl, 81 population growth, 253 Warsh, Kevin, 244–47 productivity growth, 85, 253 Watson, Mark, 65–66, 69 total facot, 236n2 Weber, Max, 222 volatility of, 257 Weymuller, Charles- Henri, 34 true price signal, 148 Wieland, Volker, 52–57, 86, 192, 196 Trump, Donald, 234 on euro crisis, 231–32 Turkey, 103 on natural rate, 81–83, 87–88 Wilhelmsen, B. R., 52–53 unemployment rate, 42, 53–54, 67f, 68f, 69f Williams, John C., 47–55, 58, 82–83, 106, 198 on infl ation, 65–67 Wolters, Maik, 55–57 labor force, 257–58 Woodford, Michael, 13, 125–27 trends in, 160–61 World War II, 227–28 See also layoff s; wages Wright, Jonathan, 106, 108, 140 unionization, 70 United Kingdom, 89, 234 Yellen, Janet, 51–54, 59, 83–84, 128, 192 United States (US), 89 Yellen- Taylor rule, 54 economy of, 64, 90f yield curve, 251 history in, 220 interest rates in, 103–4 zero interest rates, 92 University of Rochester, 1 zero lower bound (ZLB), 62–64, 93–94, 198 Uribe, Martin, 110–11 alternative to, 254 US. See United States as binding, 117–20 Bullard on, 260–63 values, 48 Cochrane on, 123–29, 179–80, 260 venture community, 242 fear of, 102 Vissing- Jorgensen, Annette, 31 fi scal multiplier in, 117–20, 118f, 119f Volcker, Paul, 127–28, 188–89, 215 quiet, 99–102, 105–6, 123–30, 262 Von Wachter, Till, 70–71 targeting, 252–53, 258–59