"Forecast targeting", forward-looking monetary policy that uses central-bank judgment to construct optimal policy projections of the target variables and the instrument rate, may perform substantially better than monetary policy that disregards judgment and follows a given instrument rule. This...

In this paper we adopt a Bayesian approach toward the estimation of monetary policy preference parameters in a general equilibrium framework for the euro area. We assume that monetary policy authorities optimize an intertemporal quadratic loss function under commitment and study two alternative...

In this paper, we consider whether long-term inflation expectations have become better anchored in Brazil, Chile, and Mexico. We do so using survey-based measures as well as financial-market-based measures of long-term inflation expectations, where we construct the market-based measures from...

This paper investigates the impact of the Bank of England’s quantitative easing policy on UK asset prices. Based on analysis of the reaction of financial market prices and modelbased estimates, we find that asset purchases financed by the issuance of central bank reserves - which by February...

Central banks have a variety of tools for implementing monetary policy, but the tool that has received the most attention in the literature has been the overnight interest rate. The financial crisis that erupted in the summer of 2007 has refocused attention on other channels of monetary policy,...

Many recent empirical studies have reported that the passthrough from money-market rates to retail lending rates is far from complete in the euro area. This paper formally shows that when only a fraction of all the loan rates is adjusted in response to a shift in the policy rate, fluctuations in...

We investigate whether the anchoring properties of longrun inflation expectations in the United States, the euro area, and the United Kingdom have changed around the economic crisis that erupted in mid-2007. We document that surveybased measures of long-run inflation expectations remained fairly...

Since 1997, the Bank of England Monetary Policy Committee (MPC) has met monthly to set the UK policy interest rate. Using a Markov-switching framework that incorporates endogenous transition probabilities, we examine intraday, five-minute return data for evidence of systematic patterns in...

This paper quantifies the procyclical effects of bank capital requirements in a general equilibrium model where financing of capital goods production is subject to an agency problem. At the center of this problem is the interaction between entrepreneurs’ moral hazard and liquidity provision by...

A two-country general equilibrium model with large wage setters is developed to investigate the welfare implications of moving from a flexible exchange rate regime to a monetary union. The paper shows that the currency regime not only affects the central bank’s incentive to improve the terms...