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Can central banks defuse rising stability risks in financial booms by leaning against the wind with higher interest rates? This paper studies the state-dependent effects of monetary policy on financial stability. Based on the near-universe of advanced economy financial cycles since the 19th...
Persistent link: https://www.econbiz.de/10012260596
Over the last two decades, the Federal Open Market Committee (FOMC), the rate-setting body of the United States Federal Reserve System, has become increasingly communicative and transparent. According to policymakers, one of the goals of this shift has been to improve monetary policy...
Persistent link: https://www.econbiz.de/10013126070
This paper introduces agent heterogeneity, liquidity, and endogenous default to a DSGE framework. Our model allows for a comprehensive assessment of regulatory and monetary policy, as well as welfare analysis in the different sectors of the economy. Due to liquidity and endogenous default, the...
Persistent link: https://www.econbiz.de/10003923247
This paper examines the Federal Reserve's unprecedented liquidity provision during the financial crisis of 2007-2009. It first reviews how the Fed provides liquidity in normal times. It then explains how the Fed's new and expanded liquidity facilities were intended to enable the central bank to...
Persistent link: https://www.econbiz.de/10013102405
In responding to the severity and broad scope of the financial crisis that began in 2007, the Federal Reserve has made aggressive use of both traditional monetary policy instruments and innovative tools in an effort to provide liquidity. In this paper, I examine the Fed's actions in light of the...
Persistent link: https://www.econbiz.de/10013156383
Can central banks defuse rising stability risks in financial booms by leaning against the wind with higher interest rates? This paper studies the state-dependent effects of monetary policy on financial stability. Based on the near-universe of advanced economy financial cycles since the 19th...
Persistent link: https://www.econbiz.de/10012825398
This paper documents macroeconomic forecasting during the global financial crisis by two key central banks: the European Central Bank and the Federal Reserve Bank of New York. The paper is the result of a collaborative effort between the two institutions, allowing us to study the time-stamped...
Persistent link: https://www.econbiz.de/10013050511
This paper explores financial stability policies for the shadow banking system. I tie policy options to economic mechanisms for shadow banking that have been documented in the literature. I then illustrate the role of shadow bank policies using three examples: agency mortgage real estate...
Persistent link: https://www.econbiz.de/10013058847
In the conduct of monetary policy, there exists a risk-return trade-off between financial conditions and financial stability, which complements monetary policy's traditional trade-off between inflation and real activity. The trade-off exists even if monetary policy does not target financial...
Persistent link: https://www.econbiz.de/10013047519
In our article we review the secular stagnation hypothesis, firstly postulated by Hansen (1939), to describe the current macroeconomic dynamics faced by developed economies. Based in the existing literature, we elaborate on a workable definition of secular stagnation founded on four pillars:...
Persistent link: https://www.econbiz.de/10012815750