I develop a banking model with monopolistic competition to analyze the effect of reserve rate policy on bank insolvency risk, when banks are constrained by a zero lower bound on deposit rates. When binding, the lower bound compresses the solvency relevant deposit spread and causes it to be a...

We study how short-term interest rate volatility affects the transmission of monetary policy. To identify exogenous changes in volatility, we exploit the pronounced heteroskedasticity visible in the time-series of euro area short-term rates over the past two and a half decades. Interacting the...

This paper analyzes the transmission of ECB policy rate changes to bank interest rates in Kosovo during the 2022-23 tightening cycle. While both lending and deposit rates increased, the passthrough was more limited compared to the euro area and regional peers. Three key factors explain this...

I show that in linear rational expectation models, the effect of a monetary tightening can be simulated using contemporaneous and anticipated monetary policy shocks that replicate the forward curves observed during the period of interest, normalized with the forward curve observed in the quarter...

The ECB can fulfil its mandate better and contribute to a stronger Europe by adopting sensible rules instead of relying on discretionary decision-making. A simple rule for the policy rate can promote systematic monetary policy and protect against significant policy errors. Ending the reliance on...

The relative success of Inflation Targeting (IT) amidst widespread rising inflation globally is motivating the Central Bank of Nigeria (CBN) to renew its desire for an IT framework. This paper applies the Time-Varying Parameter Structural Vector Autoregression with the Stochastic Volatility...

This study examines the dynamic interplay between interest rates, inflation, and GDP growth in Southeast Asian economies from 2000 to 2023, employing the Panel ARDL framework with the Pooled Mean Group (PMG) model. The findings confirm a robust long-term relationship among the Deposit Interest...

This paper investigates the link between bank-firm lending relationships and monetary policy pass-through, focusing on episodes of low interest rates. Using administrative tax and bank supervisory data ranging from 1997 to 2019, we track the entirety of bank-firm relationships in Norway. Our...

This study empirically investigates the impact of Inflation Targeting (IT) on nominal interest rates over the past 40 years, focusing on 10 advanced and emerging economies. By using a Binary Regime Model embedded within a Backward-Looking Taylor, our findings confirm that IT adoption has...

This paper provides a comprehensive assessment of the macroeconomic and fiscal impact of unconventional monetary tools in small open economies. Using a DSGE model, we show that the exchange rate plays a critical role to amplify the favourable impact of unconventional monetary policy while it...

For central banks, official communications serve as essential monetary policy instruments: In press releases, speeches, and interviews, central banks explain their decisions, manage expectations, and promote confidence in their strategy. This Weekly Report analyzes European Central Bank (ECB)...

This study investigates the role of housing prices in the Moroccan economy and their response to monetary policy shocks. Using a Structural Vector Autoregression (SVAR) model, we explore the transmission mechanisms of monetary policy through various channels, including interest rates, credit...

This paper assesses the causal relationship between central bank interest rate, inflation and GDP growth in Central African countries using a new leading-lagging method over the period 1990-2019. The results show a short-term relationship between the three variables, with strong evidence of...

Recent events have reignited concerns about the financial stability implications of monetary policy. We show empirically that monetary tightening exacerbates financial stress after supply shocks, through declines in asset prices, bank equity and increased run risks. We then develop a tractable...

This paper examines the challenges of formulating monetary policy in the face of heightened uncertainty. We develop a framework to assess the optimal monetary policy path under uncertainty, focusing on four key dimensions: the expectation formation process, inflation persistence, the measurement...

We study the effect of collateral eligibility of corporate loans on the pricing of these loans by banks in Finland. Speciftcally, we investigate whether loans that are pledgeable as collateral for central bank borrowing have lower liquidity premia and thus lower interest rates. For...

The extent to which changes in monetary policy rates lead to changes in loan and deposit rates for households and firms, referred to as 'pass-through', is an important ingredient of monetary policy transmission to output and prices. Using data on seven different bank interest rates in 30...

The booming retail trade and the above-target consumer prices inflation in 2023-2024 in Russia, amid tightening monetary policy stance, raise an issue of the strength of the monetary policy interest rate channel. The focus of our paper is the interest rate elasticity (given inflation...

The role of foreign exchange interventions in monetary policy conduct is an ongoing debatable issue, especially in inflation-targeting emerging economies, where monetary authority can follow other targets rather than price stability. This paper examines whether interventions in foreign exchange...

This paper investigates the implications of monetary policy rules during the surge and subsequent decline of inflation in the euro area and compares them to the interest rate decisions of the European Central Bank (ECB). It focuses on versions of the Taylor (1993) and Orphanides and Wieland (OW)...

In der Märzausgabe 2024 veröffentlichte der Wirtschaftsdienst einen Aufsatz mit dem Titel "Inflationsberechnung: Zinspolitik der EZB wird als Inflationstreiber statistisch nicht erfasst" von Johannes Schwanitz. Manuel Rupprecht vertritt in einer Replik eine andere Auffassung. Im Anschluss...

In der Märzausgabe 2024 veröffentlichte der Wirtschaftsdienst einen Aufsatz mit dem Titel "Inflationsberechnung: Zinspolitik der EZB wird als Inflationstreiber statistisch nicht erfasst" von Johannes Schwanitz. Manuel Rupprecht vertritt in einer Replik eine andere Auffassung. Im Anschluss...

We propose a two-step approach to estimate multi-dimensional monetary policy shocks and their causal effects requiring only daily financial market data and policy events. First, we combine a heteroscedasticity-based identification scheme with recursive zero restrictions along the term structure...

The Eurosystem implements its monetary policy through a set of monetary policy instruments (MPIs). The period covered by this report (2022-23) was dominated by high inflation, which led to a change from an easing to a tightening monetary policy environment in line with the mandate of the...

This paper studies how quantitative easing (QE) affects household welfare across the wealth distribution. I build a Heterogeneous Agent New Keynesian (HANK) model with household portfolio choice, wage and price rigidities, endogenous unemployment, frictional financial intermediation, an...