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Assigning a discretionary central bank a mandate to stabilize an average inflation rate—rather than a period …-by-period inflation rate—increases welfare in a New Keynesian model with an occasionally binding lower bound on nominal interest rates … inflation targeting (AIT) is equivalent to price level targeting (PLT). However, AIT with a finite, but sufficiently long …
Persistent link: https://www.econbiz.de/10012836660
Do negative policy rates hinder banks' transmission of monetary policy? To answer this question, we examine the behaviour of Italian mortgage lenders using a novel loan-level dataset. When policy rates turn negative, banks with higher ratios of retail overnight deposits to total assets charge...
Persistent link: https://www.econbiz.de/10012892476
Negative interest rate policy (NIRP) is associated with a particular friction. The remuneration of banks´ retail deposits tends to be floored at zero, which limits the transmission of policy rate cuts to bank funding costs. We investigate whether this friction affects banks’ reactions under...
Persistent link: https://www.econbiz.de/10013221074
Negative monetary policy rates are associated with a particular friction because the remuneration of retail deposits tends to be floored at zero. We investigate whether this friction affects banks' reactions when the policy rate is lowered to negative levels, compared to a standard rate cut in...
Persistent link: https://www.econbiz.de/10012869955
Exploiting confidential data from the euro area, we show that sound banks can pass negative rates on to their corporate depositors without experiencing a contraction in funding. These pass-through effects become stronger as policy rates move deeper into negative territory. Banks offering...
Persistent link: https://www.econbiz.de/10012868667
We propose a shadow-rate term structure model for the euro area yield curve from 1999 to mid-2015, when bond yields had turned negative at various maturities. Yields in the model are constrained by a lower bound, but - as a special feature of our specification - the bound is allowed to change...
Persistent link: https://www.econbiz.de/10012963943
near-term economic outlook, characterised by persistently low nominal interest rates and inflation, and in a lasting low …
Persistent link: https://www.econbiz.de/10012844862
qualitative and quantitative information on subsequent inflation. The usefulness of monetary analysis is contrasted to weaknesses … in modeling monetary policy and inflation with respectively short-term interest rates and real activity measures. The … analysis sheds light on the recent change in inflation volatility and persistence as well as on the Phillips curve flattening …
Persistent link: https://www.econbiz.de/10013317093
equilibrium real rate using an estimated DSGE model for the euro area. We find that simple feedback rules that implement inflation … targeting result in a binding lower bound one-fourth of the time as well as inflation and output exhibiting large downward … purchases. Makeup strategies, especially average inflation targeting with a long averaging window, perform better than inflation …
Persistent link: https://www.econbiz.de/10014355956
is derived from policy-makers' preferences about inflation outcomes, we first show that downside risks to price stability … future inflation can provide insurance against the materialization of such upside risks …
Persistent link: https://www.econbiz.de/10013077685