This paper analyses the impact of asymmetric preferences with respect to inflation and output by policymakers on interest-rate reaction functions and test for their existence. A modified New Keynesian framework which makes it possible to identify the dominant type of asymmetry is developed and...

Using a new consumer survey dataset, we show that macroeconomic preferences affect expectations and economic decisions through different channels. While household expectations are on average inversely related to preferences, households with the same inflation or interest rate expectations can...

In this paper we re-consider the effects of monetary policy shocks on exchange rates and forward premia. In the recent empirical literature, these effects have been predominantly described as puzzling, in that they would include delayed overshooting of the exchange rate as well as persistent...

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...

There is growing consensus that the conduct of monetary policy can have an impact on financial and economic stability through the risk-taking incentives of banks. Falling interest rates might induce a "search for yield" and generate incentives to invest into risky activities. This paper provides...