This paper explains US macroeconomic outcomes with an empirical new-Keynesian model in which monetary policy minimizes the central bank's loss function. The presence of expectations in the model forms a well-known distinction between two modes of optimization, termed commitment and discretion....

This chapter utilizes the social fabric matrix approach (SFM-A) to provide a detailed description of the Federal Reserve's (Fed's) daily operations and the recent financial crisis. The SFM of the Fed's operations presents the primary components- major norms, institutions, technologies- relevant...

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...

This paper investigates the European Central Bank's (ECB) monetary policies. It identifies an antigrowth bias in the bank's monetary policy approach: the ECB is quick to hike, but slow to ease. Similarly, while other players and institutional deficiencies share responsibility for the euro's...

In this paper we propose a new indicator of central bank's verbal guidance, which measures communications about the future based on the frequency of future verbs in monetary policy statements. We consider the press conferences of the European Central Bank as a test case. First, we analyze the...

This paper analyzes empirically differences in the size of central bank boards across countries. Defining a board as the body that changes monetary instruments to achieve a specified target, we discuss the possible determinants of a board's size. The empirical relevance of these factors is...

We use Bayesian methods to estimate the preferences of the US Federal Reserve by assuming that monetary policy is performed optimally under commitment since the mid-sixties. For this purpose, we distinguish between three subperiods, i.e. the pre-Volcker, the Volcker-Greenspan and the Greenspan...

The ongoing policy strategy review presents a unique opportunity for the ECB to examine how to best employ its immense power to fulfil its mandate. Two challenges require urgent attention. First, the “lowflation” problem – the outcome of overly tight policies that allowed inflation to...

Current best practice in central banking views a high level of monetary policy predictability as desirable. A clear distinction, however, has to be made between short-term and longer-term predictability. While short-term predictability can be narrowly defined as the ability of the public to...