We introduce a structural dynamic network model of the formation of lending relationships in the unsecured interbank market. Banks are subject to random liquidity shocks and can form links with potential trading partners to bilaterally Nash bargain about loan conditions. To reduce credit risk...

We empirically test whether there is a causal link between the real interest rate and the natural rate of interest, which could be a harbinger of secular stagnation if the real rate declines. Outcomes of VAR models for Japan, Germany and the US show that a fall in the real rate indeed affects...

This paper investigates how changes in the monetary policy framework have affected the overnight money market lending rate for the Dutch segment of the euro area during tranquil and crisis times. We present an EGARCH model on the volatility of the overnight lending rate. The results show that...

Since its inception, the European Central Bank (ECB) has regarded communication as anintegral part of its monetary policy. This paper describes and evaluates ECB communications during the first decade of its operation.We conclude that, overall, ECB communication has contributed to the...

Central banks have become increasingly transparent during the last decade. One of the main benefits of transparency predicted by theoreticalmodels is that it enhances the credibility, reputation, and flexibility of monetary policy, which suggests that increased transparency should result in...

This paper studies the implications of globalisation for the effectiveness of monetary policy in large open economies, such as the euro area and the United States. The analysis allows for imperfect competition and an endogenous home bias in consumption. I find that globalisation (a reduction in...

This report reviews Thomas J. Sargents essay 'The Conquest of American Inflation' (1999). Sargent searches for a model which can explain postwar US inflation and which may shed light on the dynamic forces which drive this pattern. Following Sargent, the conquest of US inflation is due to a...

We assess a New Keynesian macro-economic model that is supplemented with a micro-founded role for money in determining aggregate demand and supply in order to better describe monetary policy transmission. In this model welfare is higher if the monetary authority takes money growth explicitly...

There is a small, but growing, economics literature on the importance and effects of having monetary policy made by a committee, rather than by an individual. Complimenting this is an older and larger body of literature on groups in the other social sciences, particular in social psychology....

Some central banks have a reputation for being secretive. A justification for that behavior thatwe find in the literature is that being transparent about its operations and beliefs hinders the central bank in achieving the best outcome. In other words, a central bank needs flexibility and...