This paper attempts to model the relationship between monetary policy and financial asset prices. We develop an aggregative model under forward-looking rational expectations to analyse the optimal monetary policy response to stock prices and exchange rates shocks. We first demonstrate that a...

Since August 2014 the Target2 liabilities of the Bank of Italy to the Eurosystem are on an upward trend. From August 2014 to September 2016 they have increased by € 223.7 billion. According to the narrative of the ECB, surging Target2 liabilities of peripheral countries of the euro area would...

This paper makes inquiries into the adjustment and evolution of the exchange rate towards its new long-run equilibrium level following a change in money supply. Joint and sequential effects of interest rate parities and sticky prices on the rise, from the short-term through to the long-run...

To fight deflationary pressures in the euro area, the ECB has been conducting exceptional policies, such as negative interest rates on excess reserves of banks on their accounts at the Eurosystem, or massive purchases of assets, essentially public bonds. The interest rate on the main refinancing...