In this paper, we exploit micro data from the ECB Survey of Professional Forecasters (SPF) to examine the link between the characteristics of macroeconomic density forecasts (such as their location, spread, skewness and tail risk) and density forecast performance. Controlling for the effects of...

The change in macroeconomic conditions since the ECB's strategy review in 2021 towards an environment characterised by above-target inflation, high interest rates, and renewed concerns about elevated government debt has been a vocal reminder of the intricate interdependencies between monetary...

We study whether it is desirable for the central bank to supply reserves abundantly, i.e. beyond the level that satisfies financial institutions' aggregate liquidity needs. Using a theoretical framework, we demonstrate that abundant reserves would help fulfil the private sector's demand for safe...

Transaction cost shocks in financial markets are known to affect asset prices. This paper analyses how changes in transaction costs may affect the value of assets that banks use to collateralise borrowings in monetary policy operations. Based on a simple asset pricing model and employing a...

Term premia are shown to provide crucial information for discriminating among alternative sources of change in the economy, and namely shifts in the variance of structural shocks and in monetary policy. These sources have been identified as competing explanations for time-varying features of...

This paper examines the asymmetry in global spillovers from Fed policy across tightening versus easing episodes several examples of which have been on display since the global financial crisis (GFC). We build a dynamic general equilibrium model featuring: (i) occasionally binding collateral...

In an economy with an occasionally binding zero lower bound (ZLB) constraint, the anticipation of future ZLB episodes creates a trade-off for discretionary central banks between inflation and output stabilization. As a consequence, inflation systematically falls below target even when the policy...