The sovereign debt crisis has made it clear that central banking is more than keeping inflation low. Central banks are also responsible for financial stability. An essential tool in maintaining financial stability is provided by the capacity of the central bank to be the lender of last resort in...

The major central banks now operate in a regime of abundance of bank reserves. As a result, they can only raise the money market rate by increasing the rate of remuneration of bank reserves. This, in turn, leads to large transfers of the central banks' profits (and more) to commercial banks that...

DSGE-models have become important tools of analysis not only in academia but increasingly in the board rooms of central banks. The success of these models has much to do with the coherence of the intellectual framework it provides. The limitations of these models come from the fact that they...