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NBER Working Papers and Publications
|August 2015||The Equilibrium Real Funds Rate: Past, Present and Future|
with James D. Hamilton, Ethan S. Harris, Kenneth D. West: w21476
We examine the behavior, determinants, and implications of the equilibrium level of the real federal funds rate, defined as the rate consistent with full employment and stable inflation in the medium term. We draw three main conclusions. First, the uncertainty around the equilibrium rate is large, and its relationship with trend GDP growth much more tenuous than widely believed. Our narrative and econometric analysis using cross-country data and going back to the 19th Century supports a wide range of plausible central estimates for the current level of the equilibrium rate, from a little over 0% to the pre-crisis consensus of 2%. Second, despite this uncertainty, we are skeptical of the “secular stagnation” view that the equilibrium rate will remain near zero for many years to come. The ev...
Published: James D. Hamilton & Ethan S. Harris & Jan Hatzius & Kenneth D. West, 2016. "The Equilibrium Real Funds Rate: Past, Present, and Future," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 64(4), pages 660-707, November. citation courtesy of
|July 2010||Financial Conditions Indexes: A Fresh Look after the Financial Crisis|
with Peter Hooper, Frederic S. Mishkin, Kermit L. Schoenholtz, Mark W. Watson: w16150
This paper explores the link between financial conditions and economic activity. We first review existing measures, including both single indicators and composite financial conditions indexes (FCIs). We then build a new FCI that features three key innovations. First, besides interest rates and asset prices, it includes a broad range of quantitative and survey-based indicators. Second, our use of unbalanced panel estimation techniques results in a longer time series (back to 1970) than available for other indexes. Third, we control for past GDP growth and inflation and thus focus on the predictive power of financial conditions for future economic activity. During most of the past two decades for which comparisons are possible, including the last five years, our FCI shows a tighter li...
Published: U.S. Monetary Policy Forum: “Financial Conditions Indexes: A Fresh Look After the Financial Crisis,” (with Jan Hatzius, Peter Hooper, Frederic Mishkin, Kermit L. Schoenholtz and Mark W. Watson) U.S. Monetary Policy Forum (Chicago: Chicago Booth Initiative on Global Markets, 2010) pp. 3-59.