We study whether the mechanism design in the central bank liquidity auctions matters for the interbank money market interest rate levels and volatility. Furthermore, we compare different mechanisms to sell liquidity in terms of revenue, efficiency and auction stage interest rate levels and...

This paper presents an interest group theory of central bank independence. The theory is grounded in the concept of rent extraction. In the absence of an independent central bank, politicians can benefit in the short run by creating an unanticipated burst of inflation that unravels many interest...

This paper considers a central puzzle of central bank independence: why politicians would agree to establish such a bank, when the consequence is giving up a substantial degree of control over the money supply and price levels. I suggest that politicians agree to establish independent central...

New Keynesian dynamic stochastic general equilibrium models are the principal paradigm currently employed for central bank policy-making. In this paper, we construct experimental economies, populated with human subjects, with the structure of a New Keynesian DSGE model. We give individuals...

During the Great Recession, the Federal Reserve implemented several novel programs to address adverse conditions in financial markets. Three of these temporary programs relied on an auction mechanism: the Term Auction Facility, the Term Securities Lending Facility, and the disposition of the...

During the Great Recession, the Federal Reserve implemented several novel programs to address adverse conditions in financial markets. Three of these temporary programs relied on an auction mechanism: the Term Auction Facility, the Term Securities Lending Facility, and the disposition of the...

How willing are individual primary dealers to alter their offered yields in central bank quantitative easing auctions of government bonds in order to sell an additional share of the outstanding amount of a bond to the central bank? This question is of great importance for a central bank's...

The paper examines how rules and institutions as well as the monetary-fiscal coordination setup impact welfare outcomes of a reform during uncertainty shocks. We define uncertainty shocks as sudden events that create ambiguity about future course of economic policies chosen by policy makers as...

In this paper we investigate the possible effects of fiscal tightening in Hungary from two perspectives. First, simulations in an estimated neo-Keynesian model are used to characterise the effects of different scenarios for fiscal consolidations. We show that the composition of fiscal shocks is...