We explore the role of ‘dollar shortage' shocks and central bank swap lines in a two-country New Keynesian model with financial frictions. Domestic banks issue both domestic and foreign currency debt and lend in domestic currency. Foreign currency-specific funding shocks, which are amplified...

In this paper we investigate the price, volatility and micro-level effects of central bank swap lines during the 2020 pandemic. These policies lowered the ceiling on covered interest rate parity violations and reduced volatility following settlement of swap line auctions. We then combine...

Swap lines between advanced-economy central banks are a new important part of the global financial architecture. This paper analyses their monetary policy effects from three perspectives. First, from the perspective of the central banks, it shows that the swap line mimics discount-window credit...

It is well known that quantitative credit restrictions, rather than Bagehot-style ‘free lending' constituted the standard response to financial crises in the early days of central banking. But why did central banks in the past frequently restrict the supply of loans during financial crises? In...

Does the effect of monetary policy depend on the macroeconomic information released by the central bank? Because differences between central bank's and private agents' information sets affect private agents' interpretation of policy decisions, this paper aims to investigate whether the...

This paper examines how the preferences of a large economy's central bank affect the trade-off between output and inflation volatility faced by the central bank of a small open economy by analysing the impact of a global cost-push shock. We demonstrate that under the assumption of producer...

A commonly held view is that the life of a monetary policy maker forced to operate under discretion can be improved by the authorities delegating monetary policy objectives that are different from the social welfare function (including interest rate smoothing, price-level targeting and...

We use a DSGE model with financial frictions, leverage limits on banks, loan to value (LTV) limits and debt‑service ratio (DSR) limits on mortgage borrowing to examine: i) the effects of different macroprudential policies on key macro aggregates; ii) their interaction with each other and with...

This paper explores whether different funding structures – including the source, instrument, currency, and counterparty location of funding – affected the extent of financial stress experienced in different countries and sectors during the early stages of the Covid-19 pandemic. We measure...

This paper develops a model featuring both a macroeconomic and a financial friction that speaks to the interaction between monetary and macroprudential policy and to the role of US monetary and regulatory policy in the run up to the Great Recession. There are two main results. First, real...