The Eurosystem's large-scale asset purchases (quantitative easing, QE) induce a strong and persistent increase in excess reserves in the euro area banking sector. These excess reserves are heterogeneously distributed across euro area countries. This paper develops a two-country New Keynesian...

Twenty years after the introduction of the euro, this Weekly Report uses an empirical analysis to assess the performance of monetary policy in the EMU founding states. It is often claimed that the monetary policy of the European Central Bank (ECB) cannot outperform its national predecessors, as...

Modern OCA theory has developed different conclusions on when forming a currency union is beneficial. An important pragmatic question in this context is: Did delegating monetary policy to the ECB increase stress in the individual euro area countries? An SVAR analysis reveals that monetary stress...

This note proposes an update to Figure 1 in "Macroeconomic Shocks and their Propagation" in the Handbook of Macroeconomics of 2016 (Ramey, 2016). Figure 1 of Ramey (2016) reports Impulse-Response Functions (IRFs) of variables of interest to a shock in the Federal Funds Rate, following the...

The viability of forward guidance as a monetary policy tool depends on the horizon over which it can be communicated and its influence on expectations over that horizon. We develop and estimate a model of imperfect central bank communications and use it to measure how effectively the Fed has...