Japan has experienced stagnation, deflation, and low interest rates for decades. It is caught in a liquidity trap. This paper examines Japan’s liquidity trap in light of the structure and performance of the country’s economy since the onset of stagnation. It also analyzes the country’s...

Although designed to support monetary policy, two crucial aspects of the central bank framework can disconnect the monetary policy transmission: banks' access to central bank deposits and Quantitative Easing (QE). We show how both hinder the monetary policy transmission through the main...

Do negative policy rates hinder banks' transmission of monetary policy? To answer this question, we examine the behaviour of Italian mortgage lenders using a novel loan-level dataset. When policy rates turn negative, banks with higher ratios of retail overnight deposits to total assets charge...

Leaning against the wind of credit booms is a monetary policy that is tighter than what is consistent with standard inflation targeting. This way the central bank tries to address excessive household debt. While the merits of such policy have been analysed, I argue that there are two dimensions...

We study the relationship between monetary policy and long‐term rates in a structural, general equilibrium model estimated on both macro‐ and yield‐data from the United States. Regime shifts in the conditional variance of productivity shocks, or "uncertainty shocks," are a crucial driver...

A measure of the neutral policy interest rate can be used to gauge the stance of monetary policy. We define the neutral rate as the real policy rate consistent with output at its potential level and inflation equal to target after the effects of all cyclical shocks have dissipated. This is a...

It has become common practice to estimate the response of asset prices to monetary policy actions using market-based measures such as the unexpected change in the federal funds futures rate as proxies for monetary policy shocks. I show that because interest rates and market-based measures of...

We develop a model of monetary policy with a small departure from the basic New Keynesian (NK) model. In this model, the central bank can set the interest rate on bank reserves and the nominal stock of bank reserves independently, because these reserves reduce the costs of banking (i.e., have a...

The recent global financial crisis has led central banks to rely heavily on "unconventional" monetary policies. This alternative approach to policy has generated much discussion and a heated and at times confusing debate. The debate has been complicated by the use of different definitions and...

The paper takes a critical look at the conceptual and empirical underpinnings of prevailing explanations for low real (inflation-adjusted) interest rates over long horizons and finds them incomplete. The role of monetary policy, and its interaction with the financial cycle in particular, deserve...