While knowing there is a financial distress when you see it might be true, it is not particularly helpful. Indeed, central banks have an interest in understanding more systematically how their communication affects the markets, not least in order to avoid unnecessary volatility; the markets for...

What are the implications of targeting different measures of inflation? We extend a basic theoretical framework of optimal monetary policy under inflation targeting to include several components of CPI inflation ratio, and analyze the implications of using different measures of inflation as...

The analysis of this paper demonstrates that when the Phillips curve has forward-looking components, a goal for average inflation - i.e. targeting a j-period average of one-period inflation rates - will cause inflation expectations to change in a way that improves the short-run trade-off faced...

This paper evaluates the precision of the parametric double lognormal (DLN) and the nonparametric smoothing spline method (SPLINE) for estimating risk-neutral distributions (RNDs) from observed option prices. By using a bootstrap technique confidence bands are estimated for the riskneutral...

We construct a monetary economy in which agents face aggregate demand shocks and heterogeneous idiosyncratic preference shocks. We show that, even when the Friedman rule is the best interest rate policy the central bank can implement, not all agents are satiated at the zero lower bound and...

The properties of money commonly referenced in the economics literature were originally identified by Jevons (1876) and Menger (1892) in the late 1800s and were intended to describe physical currencies, such as commodity money, metallic coins, and paper bills. In the digital era, many...

This paper addresses two important questions that have, so far, been studied separately in the literature. First, the paper aims at explaining the high volatility of long-term interest rates observed in the data, which is hard to replicate using standard macro models. Building a small-scale...

This paper aims to evaluate if frictions in credit markets are important for business cycles in the U.S. and the Euro area. For this purpose, I modify the DSGE financial accelerator model developed by Bernanke, Gertler and Gilchrist (1999) by adding frictions such as price indexation to past...

The transmission effect of money has been a frequently debated issue. This paper discusses the empirical literature examining the effect of money on real output. In contrast to the commonly held belief that money has a powerful effect on output, most empirical tests of money shows relatively...

This paper proposes the use of the two-factor term-structure model of Longstaff and Schwartz (1992a,LS) to estimate the risk-neutral density (RND) of the futur short-term interest rate. THe resulting RND can be interpreted as the market´s estimate of the density of the future short-term...