We provide a framework for understanding banks’ demand for central bank reserves. The main reserve demand drivers are: The spread between market rates and the interest rate on reserves, banks’ liquidity needs (implying that reserves generate a convenience yield), and bank balance sheet...

We propose a novel approximation of the risky steady state and construct first-order perturbations around it for a general class of dynamic equilibrium models with time-varying and non-Gaussian risk. We offer analytical formulas and conditions for their local existence and uniqueness. We apply...

We investigate how macroeconomic drivers influence the predictive inflation distribution and establish two key findings. First, the recent muted response of the conditional mean of inflation to economic conditions does not convey a complete picture of inflation dynamics. Indeed, we find ample...

The purpose of the present paper is twofold. First, we characterize the Fed's systematic response to technology shocks and its implications for U.S. output, hours and inflation. Second, we evaluate the extent to which those responses can be accounted for by a simple monetary policy rule...