We build models with an interest-bearing central bank digital currency (CBDC) to investigate the impacts of issuing CBDC on banking and the macroeconomy. When CBDC is the only asset, a higher interest rate on CBDC does not necessarily lead to financial disintermediation. It could promote bank...

In its strategic review, the European Central Bank has made the integration of climate change one of its priorities for the coming years. Using textual analysis methods, we study how this topic has appeared and evolved in the speeches of the ECB's Executive Board members since 1997. After two...

The use of central bank liquidity lines has gained momentum since the global financial crisis in order to provide liquidity in foreign exchange markets, while at the same time preventing threats to financial stability and negative spillbacks. US dollar swap lines are well studied, but much less...

Following a scarcity of dollar funding available internationally to banks and financial institutions, in December 2007 the Federal Reserve began to establish or expand Temporary Reciprocal Currency Arrangements with fourteen foreign central banks. These central banks had the capacity to use...

We study the impact of different central bank communication practices on the trading behavior and profitability of fast and slow traders in the foreign exchange market. We focus, in particular, on how the Bank of Japan's practice of introducing some randomness to the time at which it releases...

Between August 2011 and December 2012 the Federal Open Market Committee (FOMC) used date-based forward guidance to help stimulate the U.S. economy and promote its objectives of maximum employment and price stability. Some have argued that the formulation of the guidance that the FOMC used may...

This paper studies central bank communication of the ECB as a potential factor that explains the contribution to systemic risk for a panel of large banks in the Eurozone between 2002 and 2018. The empirical evidence suggests that the ECB is able to use central bank communication to effectively...

We examine how the language used by central bank officials in public press conferences influences stock returns in the euro area. In line with the concept of Odyssean Forward Guidance, we find that using constraining language to express policy commitment increases the effectiveness of Forward...

Are critics' concerns for bank profitability a justification for the European Central Bank to raise interest rates from the (zero) lower bound (ZLB)? Using a general equilibrium model with banks and collateral default, we analyze optimal monetary and regulatory policy upon departure from the...

This paper outlines important lessons for monetary policy. In particular, the role of inflation targeting, which was much acclaimed prior to the financial crisis and since then has not lost much of its endorsement, is critically reviewed. Ignoring the relation between monetary policy and asset...