The evidence suggests that monetary policy transmission is asymmetric over the business cycle. Interacting financing frictions with a preference for liquidity provides an explanation for this fact. Our mechanism generates monetary asymmetries in a model that jointly reproduces a set of asset...

In this paper, we study the dynamics and drivers of sovereign bond yields in euro area countries using a factor model with time-varying loading coefficients and stochastic volatility, which allows for capturing changes in the pricing mechanism of bond yields. Our key contribution is exploring...

This paper uses index number theory to disentangle changes in aggregate retail interest rates due to changes in individual component rates ("interest rate effect") from those caused by changes in the weights of each component ("weight effect"), on the basis of the "difference" index numbers...

We build a novel macro-finance model that combines a semi-structural macroeconomic module with arbitrage-free yield-curve dynamics. We estimate it for the United States and the euro area using a Bayesian approach and jointly infer the real equilibrium interest rate (r*), trend inflation (π*),...

This paper provides new empirical evidence that bears on the efficacy of unconventional monetary policies when the main policy rate is negative. When a negative interest rate policy (NIRP) is deployed in concert with rate forward guidance (FG) and quantitative easing (QE), the identification of...

Climate change is one of the biggest economic challenges of our time. Given the scale of the problem, the question of whether a carbon tax should be introduced is hotly debated in policy circles. This paper studies the optimal design of a carbon tax when environmental factors, such as air carbon...

We propose a novel observation-driven finite mixture model for the study of banking data. The model accommodates time-varying component means and covariance matrices, normal and Student's t distributed mixtures, and economic determinants of time-varying parameters. Monte Carlo experiments...