We analyse the effects of central bank government bond purchases in an estimated DSGE model for the euro area. In the model, central bank asset purchases are relevant in so far as agency costs distort banks asset allocation between loans and bonds, and households face transaction costs when...

This paper analyses the cross-country heterogeneity in retail bank lending rates in the euro area and presents newly developed pass-through models that account for the riskiness of borrowers, the balance sheet constraints of lenders and sovereign debt tensions affecting interest rate-setting...

The objective of this paper is to examine the main features of optimal monetary policy cooperation within a micro-founded macroeconometric framework. First, using Bayesian techniques, we estimate a two-country dynamic stochastic general equilibrium (DSGE) model for the United States (US) and the...

Euro area data show a positive connection between sovereign and bank risk, which increases with banks' and sovereign long run fragility. We build a macro model with banks subject to moral hazard and liquidity risk (sudden deposit withdrawals): banks invest in risky government bonds as a form of...

This paper investigates the efficiency of various monetary policy instruments to stabilize asset prices in a liquidity crisis. We propose a macro-finance model featuring both traditional and shadow banks subject to funding risk. When banks are well capitalized, they have access to money markets...

This paper examines the interactions of macroprudential and monetary policies. We find, using a range of macroeconomic models used at the European Central Bank, that in the long run, a 1% bank capital requirement increase has a small impact on GDP. In the short run, GDP declines by 0.15-0.35%....

We quantify the size of fiscal multipliers under financial fragmentation risk and demonstrate how non-standard monetary policy can support the macroeconomic transmission of fiscal interventions. We employ a DSGE model with financial frictions whereby the interplay of corporate, banks and...

This paper studies the macroeconomic consequences of the COVID-19 pandemic and makes a first step in adapting the central bank modelling apparatus to the new economic landscape. We augment the ECB-BASE model with the predictive dynamics of the SIR model in order to assess the interplay between...

Could a monetary policy loosening entail the opposite effect than the intended expansionary impact in a low interest rate environment? We demonstrate that the risk of hitting the rate at which the effect reverses depends on the capitalization of the banking sector by using a non-linear...

This paper presents first the estimation of a two-country DSGE model for the euro area and the rest-of-the-world including relevant oil-price channels. We then investigate the optimal resolution of the policy tradeoffs emanating from oil-price disturbances. Our simulations show that the...