This study evaluates the effectiveness of Japan's unconventional monetary policies over the past quarter century within a unified term structure framework. It specifically examines the impact of the Bank of Japan's (BOJ) outcome-based forward guidance and yield curve control (YCC) and...

I show that in a canonical HANK model, under a balanced budget fiscal rule, the effect of a nominal interest rate peg is much larger than in a representative agent (RA) model. By contrast, under a standard fiscal rule where tax revenue responds gradually to deviations of the debt-to-GDP ratio...

This paper introduces a business cycle model that integrates financial markets and endogenous financial volatility at the Zero Lower Bound (ZLB). We derive three key insights: first, central banks can mitigate excess financial volatility at the ZLB by credibly committing to future economic...

Forward guidance provides monetary policy communication for an economy at the effective lower bound (ELB). In this paper, we consider both calendar- and outcome-based forward guidance about the timing of liftoff. We develop a novel macro-finance shadow rate term structure model by introducing...

I prove that in any linearized general equilibrium model with existence and uniqueness of equilibrium, any present response to a future shock always becomes weaker the further away the shock is. There is no forward guidance puzzle in any sensible general equilibrium model if forward guidance is...

In the aftermath of the global financial crisis, central banks started being confronted with severe challenges that led to an unprecedented policy response in terms of the size and variety of monetary policy measures. One such measure centred on central banks communicating to the public more...

Durable goods attenuate the power of forward guidance. The extensive and intensive margins of durable goods demand are both more sensitive to the contemporaneous user cost than to future user costs. Changes in the contemporaneous real interest rate directly affect the contemporaneous user cost...

This paper examines the responses of foreign exchange rates to the Federal Reserve's large-scale asset purchases (LSAPs) and forward guidance (FWG) from 2009 to 2022 using local projections. I confirm heterogeneous responses of examined foreign exchange rates to unconventional shocks, varying by...

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...

I show that in a canonical HANK model, under a balanced budget fiscal rule, the effect of a nominal interest rate peg is much larger than in a representative agent (RA) model. By contrast, under a standard fiscal rule where tax revenue responds gradually to deviations of the debt-to-GDP ratio...

This paper introduces a business cycle model that integrates financial markets and endogenous financial volatility at the Zero Lower Bound (ZLB). We derive three key insights: first, central banks can mitigate excess financial volatility at the ZLB by credibly committing to future economic...

This paper provides novel empirical evidence on the impact of monetary policy on innovation investment using unique firm-level data. First, we document the ef- fect of a large, systematic monetary tightening (ECB rate increases from 0% to 4.5% during 2022-23), with average firm-level innovation...

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...

How do different monetary policy tools influence residential housing markets, and how do these effects vary between owner-occupied and rental segments? To answer this question, we assemble a new monthly regional dataset from 35 million real estate listings over the period 2007- 2023 and exploit...

This paper examines the responses of foreign exchange rates to the Federal Reserve's large-scale asset purchases (LSAPs) and forward guidance (FWG) from 2009 to 2022 using local projections. I confirm heterogeneous responses of examined foreign exchange rates to unconventional shocks, varying by...

This paper provides novel empirical evidence on the impact of monetary policy on innovation investment using unique firm-level data. First, we document the effect of a large, systematic monetary tightening (ECB rate increases from 0% to 4.5% during 2022-23), with average firm-level innovation...

This paper reconsiders the degree to which macroeconomic stabilization is possible when the zero lower bound is a relevant constraint on the effectiveness of conventional monetary policy, under an assumption of bounded rationality. In particular, we reconsider the potential role of...

With a binding effective lower bound on interest rates and large government deficits, conventional policies are unviable and policymakers resort to unconventional policies, which target households' expectations directly. Using unique micro data and a difference-in-differences strategy, we assess...

Under uncovered interest parity (UIP), the size of the effect on the real exchange rate of an anticipated change in real interest rate differentials is invariant to the horizon at which the change is expected. Empirical evidence using US, euro area and UK data points to a substantial deviation...

We develop a New Keynesian model with household heterogeneity and bounded rationality in the form of cognitive discounting. The interaction of household heterogeneity and bounded rationality generates amplification of monetary and fiscal policy through indirect general equilibrium effects while...

We study a real small open economy with two key ingredients: (i) partial segmentation of home and foreign bond markets and (ii) a pecuniary externality that makes the real exchange rate excessively volatile in response to capital flows. Partial segmentation implies that, by intervening in the...

How can the central bank credibly implement a ``lower-for-longer'' strategy? To answer this question, we analyze a series of optimal sustainable policy problems---indexed by the duration of reputational loss---in a sticky-price model with an effective lower bound (ELB) constraint on nominal...

Unconventional monetary policies have now been part of the toolkit of developed economy central banks for over a decade. The question of how their effects have changed over time is therefore an important one. This paper studies the impact of multiple forms of monetary policy surprise for the...

We study the incidence and severity of lower-bound episodes and the efficacy of three types of state-dependent policies - forward guidance about the future path of interest rates, large-scale asset purchases and spending-based fiscal stimulus - in ameliorating the adverse consequences stemming...