In this paper, we provide determinacy conditions, i.e. conditions ensuring the existence and uniqueness of a bounded solution, in a purely forward-looking linear Markov switching rational expectations model. We thus settle the debate between Davig and Leeper (2007) and Farmer et al. (2010). The...

In February 2005 Federal Reserve Chairman Alan Greenspan noticed that the 10-year Treasury yields failed to increase despite a 150-basis-point increase in the federal funds rate as a “conundrum.” This paper shows that the connection between the 10-year yield and the federal funds rate was...

The paper investigates to what extent some basic tools of the ECBs monetary analysis can be useful for other central banks given their specific institutional, economic and financial environment. We take the case of the Bank of Russia in order to show how to adjust methods and techniques of...

A key lesson of the 2007-2009 global financial crisis was the importance of containing systemic financial risk and the need for a “macroprudential” approach to surveillance and regulation that can identify system-wide risks and take appropriate actions to maintain financial stability. By...

In this paper, we examined monetary policy from August 2007, when the Fed engaged in its first unconventional action, through December 2009, when most of the Fed's special lending facilities became inactive. However, the monetary base remained in excess of $2 trillion which was more than double...

We propose an alternative way of estimating Taylor reaction functions if the zero-lowerbound on nominal interest rates is binding. This approach relies on tackling the real rather than the nominal interest rate. So if the nominal rate is (close to) zero central banks can influence the infl ation...

The European Central Bank (ECB) and the Bank of England (BoE) are shadowed by professionals and academic economists who provide a separate policy rate recommendation in advance of the central bank's announcement. We explore differences between shadow and actual committee decisions based on an...

Central bank financial strength has not been a significant issue for a substantial period of time. However, recent theoretical and empirical literature argues that even central banks require sufficient level of financial strength to perform functions effectively and achieve their objectives. In...

We propose an alternative way of estimating Taylor reaction functions if the zero-lowerbound on nominal interest rates is binding. This approach relies on tackling the real rather than the nominal interest rate. So if the nominal rate is (close to) zero central banks can influence the inflation...

This paper develops a theoretical model which replicates main features of the euro overnight interbank market and the Eurosystem's operational framework, which has been in place since September 2008. Main ingredients of the model are frictions in the interbank market, a refinancing operation...