An increasing number of central banks implement monetary policy via two standing facilities: a lending facility and a deposit facility. In this paper we show that it is socially optimal to implement a non-zero interest rate spread. We prove this result in a dynamic general equilibrium model...

This paper explores the impacts on an economy of a central bank changing the size and composition of its balance sheet. One of the ways in which such asset purchases could influence prices and demand is via portfolio balance effects. We develop and calibrate a simple OLG model in which...

A small macroeconomic model is constructed to study the transmission of the monetary policy conducted by the Deutsche Bundesbank (DBB) since the middle of the 1970s. For this purpose quarterly, seasonally unadjusted data for the period from 1975 to 1998 are used, that is, the period until the...

In the presence of negative monetary-policy rates and a zero lower bound on deposit rates, banks that are more exposed to central banks' asset-purchase programs reduce their lending to the real economy by more than their counterparts. When banks face a lower bound on customer deposit rates, an...

We analyze the effect of negative monetary policy rates on banks, using detailed supervisory information from Switzerland. For identification, we compare changes in the behavior of banks that had different fractions of their central bank reserves exempt from negative rates. More affected banks...

Monetary policy is superneutral in an overlapping generations model. Previous authors have argued that superneutrality does not hold in such a setting. However, the standard results rely on the counter-factual premise of helicopter money and are overturned if money creation through open market...

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...

The interplay between banks and the macroeconomy is of key importance for financial and economic stability. We analyze this link using a factor-augmented vector autoregressive model (FAVAR) which extends a standard VAR for the U.S. macroeconomy. The model includes GDP growth, inflation, the...

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...

A persistent criticism of general equilibrium models of monetary policy which incorporate nominal inertia in the form of the New Keynesian Phillips Curve (NKPC) is that they fail to capture the extent of inflation inertia in the data. In this paper we derive a general equilibrium model based on...