Using the recursive unit root test by Phillips et al. (2011) we show that the Target balances of the German Bundesbank have been explosive from the beginning of 2009 to the beginning of 2013. By implementing a full-allotment policy and reducing the required minimum quality of collaterals in...

Recently macroeconomic researchers have begun studying models of optimal monetary policy within the Real Business Cycle (RBC) framework. A standard RBC model is augmented by New Keynesian elements like sticky prices and monopolistically competitive firms. The monetary authority acts as a social...