We build a model in which the Fed and market disagree about future aggregate demand. The anticipates monetary policy “mistakes,” affect current demand induce to partially accommodate market’s view. expects implement its view gradually. Announcements that reveal an unexpected change Fed’s belief provide microfoundation for shocks. Tantrum shocks arise when misinterprets overreacts announcement. ...

This paper surveys the institutional and operational features of the six modern currency boards. The survey is developed around three key aspects: organisation, operations and legal foundation. By laying out the facts, this survey seeks to shed light on how and why modern currency boards in practice are different from the classic definition, and to distil from their features an updated definiti...

This paper evaluates the literature on international unconventional monetary policies (UMPs). Introducing market segmentation, limits-to-arbitrage, and time-consistent policy in standard models permits a theoretical role for UMP. Empirical studies provide compelling evidence that UMPs influenced asset prices tail risk desired manner. Calibrated modeling vector autoregressive (VAR) exercises imp...

This paper derives the optimal size and timing of interest rate target changes. Despite the simplicity of the optimal rule, we are able to replicate a number of puzzling features of interest rate targeting observed in practice, as well as explain some dynamic properties of market interest rates. Extensions to deal with monetary policy cycles, anticipated and unanticipated target changes, and th...

We add inside and outside money to the standard GEI model. If there enough gains to trade via money, then monetary equilibrium (ME) exists and money has positive value, even when GEI fails to exist. The nonexistence of GEI shows up as a liquidity trap in terms of the ME. In sharp contrast to GEI, the ME are generically determinate not only in terms of real, but also financial, variables. © 2003...