This paper evaluates the impact of the March 2020 European Central Bank recommendation that banks do not pay dividends or buy back shares on their market values. It documents a causal negative impact on bank share prices of around 7% during the two weeks following its announcement. The...

Empirical analyses starting from Laubach and Williams (2003) find that the natural rate of interest is not constant in the long-run. This paper studies the optimal response to stochastic changes of the long-run natural rate in a suitably modified version of the new Keynesian model. We show that,...

The acceleration of house price growth amidst falling interest rates to record-low levels across euro area countries between 2015 and 2021 has sparked renewed interest in the link between the two variables. Asset-pricing theory suggests that real house prices respond to changes in real interest...

This paper investigates to what extent the introduction of negative monetary policy rates altered the competitive behaviour in the euro area banking sector. Specifically, it analyses the effect that negative policy rates had on euro area banks' market power in comparison to banks that have not...

We propose to treat survey-based density expectations as compositional data when testing either for heterogeneity in density forecasts across different groups of agents or for changes over time. Monte Carlo simulations show that the proposed test has more power relative to both a bootstrap...

What is the effect of Central Bank Digital Currency (CBDC) on financial stability? We answer this question by studying a model of financial intermediation with an endogenously determined probability of a bank run, using global games. As an alternative to bank deposits, consumers can also store...

Sector-specific macroprudential regulations can increase the riskiness of credit to other sectors. First, using cross-country bank-level data we find that after a tightening of household-specific macroprudential policy during a credit expansion, banks with larger portfolios of residential...

We show that the announcement of the ECB's Strategy Review and the revision of its inflation target in summer 2021 went largely unnoticed by the wider public. Although it is hard to reach out to this group, we find evidence that communicating key elements of the strategy can enhance the...

Bayesian decisions are observationally identical to decisions with judgment. Decisions with judgment test whether a judgmental decision is optimal and, in case of rejection, move to the closest boundary of the confidence interval, for a given confidence level. The resulting decisions condition...

How do financial markets acquire information about upcoming monetary policy decisions, beyond their reaction to central bank signals? This paper hypothesises that sharing information among investors can improve expectations, especially in the presence of disagreement or uncertainty about the...