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...

This paper analyzes the effects of the extraordinary measures implemented by the Bank of Mexico during the COVID-19 pandemic on financial conditions. For this purpose, we estimate a factoraugmented vector autoregressive (FAVAR) model for the period 2001-2021. Based on this model, we construct a...