The secular increase in globalization led to a substantial increase in the interconnectedness of global financial markets. This has important implications for the conduct of monetary policy, as central bank policies may diverge across countries, potentially affecting key transmission channels of...

Monetary policy moves the yield curve. How much is due to expected interest rates vs. term premia? And does it matter for macroeconomic outcomes? Using an affine term structure model, we shed new light on these questions. Estimation is subject to restrictions addressing an estimation bias in...

Using US data, we estimate optimal policy with a probability below one that the Fed reneges on its commitment ("limited credibility") versus discretionary policy where the Fed reneges on its commitment at all periods with a probability equal to one ("zero credibility"). The transmission...

Central banks have usually employed short-term rates as the main instrument of monetary policy. In the last decades, however, forward guidance has also become a central tool for monetary policy. In an innovative way this paper combines two sources of extraneous information - high frequency...

After decades using monetary aggregates as the main instrument of monetary policy and having different varieties of crawling peg exchange rate regimes, Colombia adopted a full-fledged inflation-targeting (IT) regime in 1999, with inflation as the nominal anchor, a floating exchange rate, and the...

This paper compares different implementations of monetary policy in a new-Keynesian setting. We can show that a shift from Ramsey optimal policy under short-term commitment (based on a negative feedback mechanism) to a Taylor rule (based on a positive feedback mechanism) corresponds to a Hopf...

Our paper addresses the issue on the interaction between monetary and macroprudential policies in small open economies for different exchange rate regimes. The need for macroprudential policy arises from exacerbated macroeconomic fluctuations due to frictions in the financial system as in...

We develop and solve a dynamic optimization model of a bank's balance sheet, highlighting the critical factors influencing banks' optimization dynamics: balance sheet adjustment costs and the spreads between bank-specific lending and deposit rates and the interbank rate. We apply the model to...

In this paper, the natural rate of interest in Denmark, Norway and Sweden are estimated. This is done by augmenting the Laubach and Williams (2003) framework with a dynamic factor model linked to economic indicators - a modelling choice which allows us to better identify business cycle...