Federal Reserve Bank of San Francisco
101 Market Street, MS 1130
San Francisco, CA 94105
Institutional Affiliation: Federal Reserve Bank of San Francisco
Information about this author at RePEc
NBER Working Papers and Publications
|December 2015||Credit Frictions and Optimal Monetary Policy|
with : w21820
We extend the basic (representative-household) New Keynesian [NK] model of the monetary transmission mechanism to allow for a spread between the interest rate available to savers and borrowers, that can vary for either exogenous or endogenous reasons. We find that the mere existence of a positive average spread makes little quantitative difference for the predicted effects of particular policies. Variation in spreads over time is of greater significance, with consequences both for the equilibrium relation between the policy rate and aggregate expenditure and for the relation between real activity and inflation.
Nonetheless, we find that the target criterion—a linear relation that should be maintained between the inflation rate and changes in the output gap—that characterizes optimal poli...
Published: Vasco Cúrdia & Michael Woodford, 2016. "Credit Frictions and Optimal Monetary Policy," Journal of Monetary Economics, . citation courtesy of
|July 2010||The Central-Bank Balance Sheet as an Instrument of Monetary Policy|
with : w16208
While many analyses of monetary policy consider only a target for a short-term nominal interest rate, other dimensions of policy have recently been of greater importance: changes in the supply of bank reserves, changes in the assets acquired by central banks, and changes in the interest rate paid on reserves. We extend a standard New Keynesian model to allow a role for the central bank's balance sheet in equilibrium determination, and consider the connections between these alternative dimensions of policy and traditional interest-rate policy. We distinguish between "quantitative easing" in the strict sense and targeted asset purchases by a central bank, and argue that while the former is likely be ineffective at all times, the latter dimension of policy can be effective when financial mark...
Published: Cúrdia, Vasco & Woodford, Michael, 2011. "The central-bank balance sheet as an instrument of monetarypolicy," Journal of Monetary Economics, Elsevier, vol. 58(1), pages 54-79, January. citation courtesy of
|February 2010||Correlated Disturbances and U.S. Business Cycles|
with : w15774
The dynamic stochastic general equilibrium (DSGE) models that are used to study business cycles typically assume that exogenous disturbances are independent autoregressions of order one. This paper relaxes this tight and arbitrary restriction, by allowing for disturbances that have a rich contemporaneous and dynamic correlation structure. Our first contribution is a new Bayesian econometric method that uses conjugate conditionals and Gibbs sampling to make the estimation of DSGE models with correlated disturbances feasible. This provides a useful check for model misspecification in the search for models with structural disturbances. Our second contribution is a re-examination of U.S. business cycles. We find that allowing for correlated disturbances resolves some conflicts between est...
|August 2009||Credit Spreads and Monetary Policy|
with : w15289
We consider the desirability of modifying a standard Taylor rule for a central bank's interest-rate policy to incorporate either an adjustment for changes in interest-rate spreads (as proposed by Taylor  and by McCulley and Toloui ) or a response to variations in the aggregate volume of credit (as proposed by Christiano et al. ). We consider the consequences of such adjustments for the way in which policy would respond to a variety of types of possible economic disturbances, including (but not limited to) disturbances originating in the financial sector that increase equilibrium spreads and contract the supply of credit. We conduct our analysis using the simple DSGE model with credit frictions developed in Curdia and Woodford (2009), and compare the equilibrium responses ...
Published: Vasco Curdia & Michael Woodford, 2010.
"Credit Spreads and Monetary Policy,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 42(s1), pages 3-35, 09.
citation courtesy of