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...

This paper examines the monetary policy constraints facing economies on a fixed peg or managed float regime, contrasting the Mundell-Fleming Trilemma view against the Compensation view commonly found at central banks. While the former holds that foreign exchange inflows and outflows affect the...

This paper examines the monetary policy constraints facing economies on a fixed peg or managed float regime, contrasting the Mundell-Fleming Trilemma view against the Compensation view commonly found at central banks. While the former holds that foreign exchange inflows and outflows affect the...

We explain how the external counterpart of the euro area M3 can be analysed by using the euro area balance of payments (b.o.p.). This is possible because the net external assets of the monetary financial institutions (MFIs) are present in two statistical frameworks that follow similar...

Bitcoin has enabled competition between digital cryptocurrencies and traditional legal tender fiat currencies. Despite rapidly increasing acceptance, so far the affirmation of cryptocurrency as better money has been thwarted by dramatic deflationary price instability. Successful at disposing of...

A small, open macro model with new transmission channels is developed to account for the post-crisis structural changes and to evaluate various policy rules for inflation targeting. Given significant changes in transmission channels and the lingering fragility in the financial sector, policy...

[enter Abstract Body]A rapid macroeconomic turnaround and lingering financial market uncertainties in Korea are seen as conflicting but consistent indicators of the fundamental weakness in financial markets. Drastic changes in firms' financing strategy, volatile capital movements, and loose...

We introduce "financial imperfections" -- asymmetric net wealth positions, incomplete risk-sharing, and interest rate spreads across member countries -- in a prototypical two-country currency union model and study implications for monetary policy transmission mechanism and optimal policy. In...

This paper is focused on Modern Monetary Theory's (MMT) treatment of inflation from an open economy perspective. It analyzes how the inflation process is explained within the MMT framework and provides empirical evidence in support of this vision. However, it also makes use of a stock-flow...