A burgeoning part of the monetary policy design literature posits that optimal monetary policy is the solution to a constrained optimization problem where the monetary authority has the discretion to minimize a social welfare function, taking the economy and other policies as given. Davig and...

When properly employed, bank stress tests can be effective as a supervisory tool to strengthen the resilience of a banking institution or a banking system overall. During the global financial crisis, stress tests were also used in public exercises intended to increase confidence in the banking...

The monetary policy of the ECB and the Fed over the past few years are compared and contrasted. The two central banks have similar price stability objectives and faced similar conditions early in the crisis, including the zero bound on short-term interest rates. Since mid-2012, their policies...