This paper discusses commercial banks’ demand for central bank reserves under two alternative monetary policy framework configurations, namely: (i) an interest rate corridor system with scarce liquidity, and (ii) a floor system with ample liquidity. It outlines the interaction between the...

We study the two-way interaction between central banks and financial markets using a beauty contest framework. The analysis identifies when asset prices reveal useful information about fundamentals and when they reflect back the central bank’s pronouncements. In equilibrium, the central bank...

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...

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...

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...

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...

This paper studies the effect of central bank collateral policy on bank credit supply and the real economy. In 2007, the European Central Bank replaced national collateral lists with a single list valid across the euro area. Banks holding newly eligible assets experienced a reduction in their...

Central bank digital currencies (CBDCs) are receiving more attention than ever before. Yet the motivations for issuance vary across countries, as do the policy approaches and technical designs. We investigate the economic and institutional drivers of CBDC development and take stock of design...