The paper assesses the communication strategies of the Federal Reserve, the Bank of England and the European Central Bank and their effectiveness. We find that the effectiveness of communication is not independent from the decisionmaking process in the committee. The paper shows that the Federal...

The response of US inflation to the high levels of spare capacity during the Great Recession of 2007-09 was rather muted. At the same time, it has been argued that the short-term unemployment gap has a more prominent role in determining inflation, and either the closing of this gap or...

We investigate the consequences of overleveraging and the potential for destabilizing effects from financial- and real-sector interactions. In a theoretical framework, we model overleveraging and indicate how a highly leveraged banking system can lead to unstable dynamics and downward spirals....

This paper develops a two-country model with asset market segmentation to investigate the effects of quantitative easing implemented by the major central banks on a typical small open economy that follows independent monetary policy. The model is able to replicate the key empirical facts on...

This paper studies the relationship between the business cycle and financial intermediation in the euro area. We establish stylized facts and study their stability during the global financial crisis and the European sovereign debt crisis. Long-term interest rates have been exceptionally high and...

Taking the mean-variance portfolio model as a benchmark, we compute the optimally diversified portfolio for banks located in France, Germany, the U.K., and the U.S. under different assumptions about currency hedging. We compare these optimal portfolios to the actual cross-border assets of banks...