SUMMARYIn this paper we model and explain US macroeconomic outcomes subject to the discipline that monetary policy is set optimally. Exploiting the restrictions that come from optimal policymaking, we estimate the parameters in the Federal Reserve's policy objective function together with the parameters in its optimization constraints. For the period following Volcker's appointment as chairman, we estimate the implicit inflation target to be around 1.4% and show that policymakers assigned a significant weight to interest rate smoothing. We show that the estimated optimal policy provides a good description of US data for the 1980s and 1990s.

This paper develops methods to solve for optimal discretionary policies and optimal commitment policies in rational expectations models. These algorithms, which allow the optimization constraints to be conveniently expressed in second-order structural form, are more general than existing methods and are simple to apply. We use several New Keynesian business cycle models to illustrate their application. Simulations show that the procedures developed in this paper can quickly solve small-scale models and that they can be usefully and effectively applied to medium-and large-scale models.

Estimated policy rules are reduced-form equations that are silent on many important policy questions. However, a structural understanding of monetary policy can be obtained by estimating a policymaker's objective function. The paper derives conditions under which the parameters in a policymaker's policy objective function can be identified and estimated. We apply these conditions to a New Keynesian sticky-price model of the US economy. The results show that the implicit inflation target and the relative weight placed on interest rate smoothing both declined when Paul Volcker was appointed Federal Reserve chairman.

High-throughput screening of methanolic extracts from the leaves of the plant Lantana camara identified potent inhibitors of human alpha-thrombin, which were shown to be 5,5-trans-fused cyclic lactone euphane triterpenes [O'Neill et al. (1998) J. Nat. Prod. (submitted for publication)]. Proflavin displacement studies showed the inhibitors to bind at the active site of alpha-thrombin and alpha-chymotrypsin. Kinetic analysis of alpha-thrombin showed tight-binding reversible competitive inhibition by both compounds, named GR133487 and GR133686, with respective kon values at pH 8.4 of 1.7 x 10(6) s-1 M-1 and 4.6 x 10(6) s-1 M-1. Electrospray ionization mass spectrometry of thrombin/inhibitor complexes showed the tight-bound species to be covalently attached, suggesting acyl-enzyme formation by reaction of the active-site Ser195 with the trans-lactone carbonyl. X-ray crystal structures of alpha-thrombin/GR133686 (3.0 A resolution) and alpha-thrombin/GR133487 (2.2 A resolution) complexes showed continuous electron density between Ser195 and the ring-opened lactone carbonyl, demonstrating acyl-enzyme formation. Turnover of inhibitor by alpha-thrombin was negligible and mass spectrometry of isolated complexes showed that reversal of inhibition occurs by reformation of the trans-lactone from the acyl-enzyme. The catalytic triad appears undisrupted and the inhibitor carbonyl occupies the oxyanion hole, suggesting the observed lack of turnover is due to exclusion of water for deacylation. The acyl-enzyme inhibitor hydroxyl is properly positioned for nucleophilic attack on the ester carbonyl and therefore relactonization; furthermore, the higher resolution structure of alpha-thrombin/GR133487 shows this hydroxyl to be effectively superimposable with the recently proposed deacylating water for peptide substrate hydrolysis [Wilmouth, R. C., et al. (1997) Nat. Struct.Biol. 4, 456-462], suggesting the alpha-thrombin/GR133487 complex may be a good model for this reaction.