A growing literature stresses the importance of the “global financial cycle”, a common global movement in asset prices and credit conditions, for emerging market economies (EMEs). It is argued that one of the key drivers of this global cycle is monetary policy in the U.S., which is...

We study the impact of the interaction between fiscal and monetary policy on the low-frequency relationship between the fiscal stance and inflation using crosscountry data from 1965 to 1999. In a first step, we contrast the monetary-fiscal narrative for Germany, the U.S. and Italy with evidence...

We analyse the effects of central bank government bond purchases in an estimated DSGE model for the euro area. In the model, central bank asset purchases are relevant in so far as agency costs distort banks' asset allocation between loans and bonds, and households face transaction costs when...

The Eurosystem’s Public Sector Purchase Programme (PSPP) increased the scarcity of safe assets, which caused significant declines and substantial dispersion in European repo rates. However, banks holding these safe assets benefited from this development: First, using the German security...

The impact of unconventional monetary policies on exchange rates and its spillovers to other economies is not yet fully understood. In this paper I develop a two-country DSGE model with interbank markets and endogenous default probabilities to analyze the cross-border impacts of unconventional...

Could a monetary policy loosening in a low interest rate environment have unintended recessionary effects? Using a non-linear macroeconomic model fitted to the euro area economy, we show that the effectiveness of monetary policy can decline in negative territory until it reaches a turning point,...

The relation between the ECB's main refinancing (MRO) rates and the money market is key for the monetary transmission process in the euro area. This paper investigates how money market rates respond to the new information revealed by MRO auctions. Our results confirm a stabilizing level...

We revisit the reversal puzzle: A counterintuitive contraction of inflation in response to an interest rate peg. We show that it is intimately related to the degree of agents' anticipation. If agents perfectly anticipate the peg, reversals occur depending on the duration of the peg. If they do...

We analyze the macroeconomic implications of a transient interest-rate peg in combination with a QE program in a non-linear medium-scale DSGE model. In this context, we re-examine what has become known as the reversal puzzle (Carlstrom, Fuerst and Paustian, 2015) and provide an analytical...

After hitting the lower bound on interest rates, the Eurosystem engaged in a public sector purchase programme (PSPP) and forward guidance (FG). We use prior and posterior predictive analysis to evaluate the importance of parameter uncertainty in an analysis of these policies. We model FG as an...