This paper presents a business cycle analysis of monetary policy shocks measured by disturbances to open market operations, i.e. the ratio of open market papers to non-borrowed reserves. We find empirical evidence for the usefulness of this policy measure, as it predicts significant declines in...

This paper proposes a theory of commodity taxation in the presence of durable goods. Optimal commodity taxes depend on preference nonseparabilities between durable and nondurable consumption. In particular, the seminal Atkinson–Stigliz result fails and differential commodity taxes are optimal...

We study implications of habit formation for optimal taxation. First, we show that taxation problems with habit formation can be analyzed using dynamic programming techniques. Second, we derive optimal labor and savings wedges for habit formation preferences. We show that habit formation...

Central bank independence and transparency have become best practice in monetary policy. This paper cautions that transparency about economic information may not be beneficial in the absence of central bank independence. The reason is that it reduces monetary uncertainty, which could make the...

This brief exposition suggests that the Federal Reserve System temporarily guarantee a lower bound on stock prices in order to escape the current combination of liquidity trap and credit crunch. It shortly discusses reasons for this measure, consequences, and some alternatives. It is meant as a...

Central bank governor changes in emerging markets may convey important signals about future monetary policy. Based on a new daily data set, this paper examines the reactions of foreign exchange markets, domestic stock market indices and sovereign bond spreads to central bank governor changes....

This paper studies the design, effects and interactions of monetary and fiscal policies in the euro-area and between the euro-area and the non euro-area. To do so, a stylized three-country model of monetary and fiscal policy rules is constructed. It is analyzed how monetary and fiscal rules...

A central issue of monetary policy analysis is the specification of monetary policy shocks. In a structural vector autoregressive setting there has been some controversy about which restrictions to use for identifying the shocks because standard theories do not provide enoughinformation to fully...

What is the optimal institutional structure for an independent central bank? The paper shows when it will be optimal for a country to have a central bank to be organized according to federal, purely national or a combination of both aspects. The analysis is then extended to a supranational...

The paper models the interaction between risk taking in the financial sector and central bank policy for the case of pure illiquidity risk. It is shown that, when bad states are highly unlikely, public provision of liquidity may improve the allocation, even though it encourages more risk taking...