The Financial Instability Hypothesis associated with Hyman Minsky has profound implications for the conduct of monetary policy in modern capitalist economies. At its core is the proposition that the central bank may contribute to the financial fragility of leveraged fi rms in its pursuit of infl...

In this paper we model the volatility of the spread between the overnight interest rate and the central bank policy rate (the policy spread) for the euro area and the UK during the two main phases of the financial crisis that began in late 2007. During the crisis, the policy spread exhibited...

This article aims to highlight the nonlinearity of the reaction function of the Central Bank of West African States (BCEAO) through financial stability. Using the smooth threshold autoregressive (STAR) model on aggregate data for the period 1970-2020, the study reveals that the dynamics of the...

This paper investigates the interaction between monetary policy and financial stability in the GulfCooperation Council (hereafter GCC) countries by introducing a new composite financial stabilityindex to monitor the financial vulnerabilities and crisis periods. To this end, the study...

We propose a novel empirical approach to inform monetary policymakers about the potential effects of policy action when facing trade-offs between financial and macroeconomic stability. We estimate a quantile vector autoregression (QVAR) for the euro area covering the real economy, monetary...

Central banks of major advanced economies have maintained a very accommodative monetary policy stance in the last few years. However, concerns have surfaced that the transmission of low policy rates to lending rates has been weaker than in the past. Has the transmission of policy rates to...

This article uses a Structural Vector Autoregressive (SVAR) approach to study the different shocks to the monetary performance in the two decades of the US economy prior to the 2008 financial crisis. By using the Federal Fund Rate as a measure of change in the monetary policy, this study shows...

Using a Markov-switching VAR with endogenous transition probabilities, we analyse what has triggered the interest rate pass-through impairment for Italy, Ireland, Spain and Portugal. We find that global risk factors have contributed to higher lending rates in Italy and Spain, problems in the...

A notable feature of the 1920s and 1930s is the volatility in several key macroeconomic aggregates, and this feature used to econometrically identify the reaction of the Fed to stock market developments. The volatility of economic activity may have contributed to deepening the divisions among...

This paper develops a regime-switching newkeynesian model for a small open economy, with an occasionally binding financial friction that allows for endogenous financial crises. The model has two regimes: a regime for normal economic times, in which financial market access is unconstrained, and a...