We analyse nominal exchange rate and price dynamics after risk premium shocks with short-term interest rates constrained by the zero lower bound (ZLB). In a small-open-economy DSGE model, temporary risk premium shocks lead to shifts of the exchange rate and the price level if a central bank...

In this paper, we analyse nominal exchange rate and price dynamics after risk shocks with short-term interest rates constrained by the zero lower bound (ZLB). We show with a stylized theoretical model that temporary risk shocks may lead to permanent shifts of the exchange rate and the price...

By the end of the Great Moderation, over two dozen central banks were formal inflation targeters, and others, such as the Federal Reserve, the European Central Bank, and the Swiss National Bank behaved essentially as inflation targeters even though they were resistant to identifying themselves...