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The recent financial crisis saw a dramatic and persistent jump in interest rate spreads between overnight federal funds and longer - term interbank loans. The Fed took several actions to reduce these spreads including the creation of the Term Auction Facility (TAF). The effectiveness of these...
Persistent link: https://www.econbiz.de/10005560681
This paper asks to what extent the market prices in the future monetary policy decisions of the Czech National Bank (CNB), how this policy predictability has evolved over time, and whether the change in the central bank’s forecasting methodology in mid-2002 had any impact. Using a sample up to...
Persistent link: https://www.econbiz.de/10005561116
Liquidity traps occur when the natural nominal interest rate becomes negative. In a model with capital price dynamics explicitly considered, we find that shocks in the future can cause current and lasting liquidity traps. We propose that the central bank can prevent or fix liquidity traps by...
Persistent link: https://www.econbiz.de/10005561118
Prevalent thinking about liquidity traps suggests that the perfect substitutability of money and bonds at a zero short-term nominal interest rate renders open-market operations ineffective for achieving macroeconomic stabilization goals. We show that even were this the case, there remains a...
Persistent link: https://www.econbiz.de/10005561168
Modern monetary policy analysis is built around the concept of an interest rate rule that responds to both inflation and output. This paper evaluates the quantitative implications of having a policy rule target different definitions of the output gap in a New Keynesian model with endogenous...
Persistent link: https://www.econbiz.de/10005561337
In this paper we analyse disinflation policy in two environments. In the first, the central bank has perfect knowledge, in the sense that it understands and observes the process by which private sector inflation expectations are generated; in the second, the central bank has to learn the private...
Persistent link: https://www.econbiz.de/10005561368
The interest rate policy of the Magyar Nemzeti Bank typically consists of taking several smaller steps in one direction. Other central banks follow similar practices. Their interest rate policy actions are characterised by gradual changes: in other words, they avoid sudden, major changes in...
Persistent link: https://www.econbiz.de/10005562406
This paper studies the pass-through from the short-term money market rate to various forint denominated bank rates in Hungary between 1997-2004. The analysis is based on linear and non-linear error correction models (ECMs), using both aggregated and bank level data. According to the linear ECM...
Persistent link: https://www.econbiz.de/10005562429
This paper describes the evolution of the daily Euro overnight interestrate (EONIA) by using several models containing the jump component such asa single regime ARCH-Poisson-Gaussian process, with either a piecewisefunction or an autoregressive conditional specification (ARJI) for the...
Persistent link: https://www.econbiz.de/10005515915
We evaluate the degree of gradualism and inaction in UK monetary policy over the Monetary Policy Committee (MPC) period (1997-2007) at the quarterly and the monthly frequency. After accounting for misspecification in standard Taylor rules, we find little evidence for gradualism. A measure of...
Persistent link: https://www.econbiz.de/10005518502