This paper provides a general strategy for analyzing monetary policy in real time which accounts for data uncertainty without explicitly modelling the revision process. The strategy makes use of all the data available from a real-time data matrix and averages model estimates across all data...

Traditionally, aggregate liquidity shocks are modelled as exogenous events. Extending our previous work (Cao & Illing, 2008), this paper analyses the adequate policy response to endogenous systemic liquidity risk. We analyse the feedback between lender of last resort policy and incentives of...

This paper provides a framework for modeling the risk-taking channel of monetary policy, the mechanism how financial intermediaries' incentives for liquidity transformation are affected by the central bank's reaction to financial crisis. Anticipating central bank's reaction to liquidity stress...

In this paper we present a three period setup to model central bank forward guidance in a liquidity trap. We analyze the role of long-run and short-run price stickiness under discretion and commitment in a straightforward and intuitive way. Despite the impact of price rigidity on welfare being...

This paper explores the role that the imperfect knowledge of the structure of the economy plays in the uncertainty surrounding the effects of rule-based monetary policy on unemployment dynamics in the euro area and the US. We employ a Bayesian model averaging procedure on a wide range of models...

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...

The paper presents a stylised framework to analyse conditions under which monetary policy contributes to amplified movements in the housing market. Extending work by Hyun Shin (2005), the paper analyses self enforcing feedback mechanisms resulting in amplifier effects in a credit constrained...

This paper investigates the out-of-sample forecast performance of a set of competing models of exchange rate determination. We compare standard linear models with models that characterize the relationship between exchange rate and its underlying fundamentals by nonlinear dynamics. Linear models...