Negative interest rates remain a controversial policy for central banks. We study a novel signalling channel and ask under what conditions negative rates should exist in an optimal policymaker's toolkit. We prove two necessary conditions for the optimality of negative rates: a time-consistent...

This paper shows the success of valuation risk-time-preference shocks in Epstein-Zin utility-in resolving asset pricing puzzles rests sensitively on the way it is introduced. The specification used in the literature is at odds with several desirable properties of recursive preferences because...

This paper develops a simple, consistent methodology for generating empirically realistic forward guidance simulations using existing macroeconomic models by modifying expectations about policy announcements. The main advantage of our method lies in the exact preservation of all other shock...

We estimate the effects of interest rate forward guidance (FG) using a parsimonious VAR, augmented with survey forecast data. The identification strategy of FG shocks via sign and zero restrictions is successfully tested by the recovery of true IRFs from simulated data. The identified shocks...

This paper presents a toolkit1 for generating optimal policy projections. It makes five contributions. First, the toolkit requires a minimal set of inputs: only a baseline projection for target and instrument variables and impulse responses of those variables to policy shocks. Second, it solves...

Do capital markets impose fiscal discipline on governments? We investigate the responses of fiscal variables to a change in the interest rate paid by governments on their debt in a panel of 14 European countries over four decades. This is done in the context of a panel vector autoregressive...

Chatbots as prominent form of conversational agents are increasingly implemented as a user interface for digital customer-firm interactions on digital platforms and electronic markets, but they often fail to deliver suitable responses to user requests. In turn, individuals are left dissatisfied...

While negative interest rates stimulate the real economy by enhancing credit supply and improving the wealth situation of firms and households, they might come with side effects with regard to banking and financial stability. In an assessment of the trade-off between the ability of a central...

Although Artificial Intelligence can offer significant business benefits, many consumers have negative perceptions of AI, leading to negative reactions when companies act ethically and disclose its use. Based on the pervasive example of content creation (e.g., via tools like ChatGPT), this...