We augment a standard monetary DSGE model to include a banking sector and financial markets. We fit the model to Euro Area and US data. We find that agency problems in financial contracts, liquidity constraints facing banks and shocks that alter the perception of market risk and hit financial...

Since the early 1990's, and until the 2008 financial crisis, the main policy tool of the FOMC has been a nominal interest rate target. This paper surveys an extensive literature that studies the link between monetary policy and the dynamics of bond yields. This literature uses ‘high-frequency'...

We augment a standard monetary DSGE model to include a banking sector and financial markets. We fit the model to Euro Area and US data. We find that agency problems in financial contracts, liquidity constraints facing banks and shocks that alter the perception of market risk and hit financial...

Part of the present inflation is caused by the breakdown of globalization, in particular supply chains, part is caused by the Corona Pandemic, in particular lockdowns, part is caused by the Ukrainian War, part is caused by European sanctions, and part - and not the smallest one - is caused by...

We provide empirical evidence of the causal effects of changes in financial intermediaries' net worth on the aggregate economy. Our strategy identifies financial shocks as high-frequency changes in the market value of intermediaries' net worth in a narrow window around their earnings...

Three conditions are suggested for establishing a stable financial system: 1. Only digital money is used. 2. The Internet of Things (IoT) uses a sustainable service of nature essential to maintain the well being of the environment and humans in each region of the planet to automatically...

Three conditions are suggested for establishing a stable financial system: 1. Only digital money is used. 2. The Internet of Things (IoT) uses a sustainable service of nature essential to maintain the well being of the environment and humans in each region of the planet to automatically...

The VIX, the stock market option-based implied volatility, strongly co-moves with measures of the monetary policy stance. When decomposing the VIX into two components, a proxy for risk aversion and expected stock market volatility (“uncertainty”), we find that a lax monetary policy decreases...

The VIX, the stock market option-based implied volatility, strongly co-moves with measures of the monetary policy stance. When decomposing the VIX into two components, a proxy for risk aversion and expected stock market volatility (“uncertainty”), we find that a lax monetary policy decreases...

We explore the role of monetary policy in a world of segmented financial markets, where only the agents who trade stocks encounter financial income risk. In such an economy, the welfare maximizing monetary policy attains the novel role of sharing the financial market risk traders face, among all...