There is a widespread agreement among central bankers around the world that the stability of the national currency should be entrusted to independent central banks. There are two arguments supporting this idea: 1. to achieve macroeconomic stability, a low and stable inflation is required, an...

The past few years have witnessed a trend of increased delegation of authority to central banks. Increasing central bank independence is a recommended strategy for governments to establish a credible commitment to price stability as the final objective of the monetary authority, even at the cost...

The real estate bubble which burst in 2008 in the USA was not exclusively the result of “animal spirits”, “crowed madness” or “irrational exuberance”. It resulted primarily because of the specific policies that the government, the Federal Reserve Board, and the regulators pursued....

In this paper, we develop a forward-looking small scale macroeconomic model (SSMM) of the Indonesian economy which is potentially useful for carrying out monetary policy analysis. The Batini-Haldane (1999) model is used as the theoretical underpinning for the development of the model along with...

In the 24 years since its introduction, the euro has experienced a financial crisis, a government debt crisis, a global pandemic, and an energy crisis-and survived. Using a model focusing on households, this Weekly Report shows that the monetary union’s stability is rooted in the fact that the...

How does a monetary union alter the impact of business cycle shocks at the household level? We develop a Heterogeneous Agent New Keynesian model of two countries (HANK2) and show in closed form that a monetary union shifts the adjustment to a shock horizontally - across countries - within the...

The paper examines whether monetary policy has similar effects across major states in the Indian polity. Impulse response functions from an estimated Structural Vector Auto Regression (SVAR) reveal two sets of states: a core of states that respond to monetary policy in a significant fashion...

This study presents an alternative reconsideration of traditional Optimum Currency Areas (OCA) macroeconomic convergence criteria as options for West African Monetary Zone (WAMZ) commencement, in the light of recent advancements in monetary theory. It presents micro-founded models, rooted in New...

We show that, in a two-stage model of monetary policy with stochastic policy targets and asymmetric information, the transparency regime chosen by the central bank does never coincide with the regime preferred by society. Independent of society's endogenous choice of delegation, the central bank...

We derive four sets of counterfactual national interest rate paths for the 17 Euro Area countries for the time period 1999 to 2012. They approximate desirable national interest rates countries would have liked to implement if they could still conduct independent monetary policy. We find that...