This paper studies the interaction between monetary policy and macroeconomic stability in a model with two distinguishing features. First, financing - cash flows - underpins all economic activity, with banks generating deposits by granting loans. Money is non-neutral as the policy interest rate...

This paper examines whether monetary policy reaction function matters for financial stability. We measure how responsive the Federal Reserve's policy appears to be to imbalances in the equity, housing and credit markets. We find that changes in these policy sensitivities predict the later...

We develop a model of monetary exchange in over-the-counter markets to study the effects of monetary policy on asset prices and standard measures of financial liquidity, such as bid-ask spreads, trade volume, and the incentives of dealers to supply immediacy, both by participating in the...

Three conditions are suggested for establishing a stable financial system: 1. Only digital money is used. 2. The Internet of Things (IoT) uses a sustainable service of nature essential to maintain the well being of the environment and humans in each region of the planet to automatically...

Based on intraday data for a large cross-section of individual stocks and Exchange traded funds, we show that short-term as well as long-term fluctuations of realized market and average idiosyncratic higher moments risks are priced in the crosssectionof asset returns. Specifically, we find that...

Collateral plays a very important role in financial markets. Without easy access to high-quality collateral, dealers and market participants would find it more costly to trade, with a negative impact on market liquidity and the real economy through increased financing costs. The role of...

In this paper, we study whether central bank communication has a positive effect on market participants' perception of central banks' (i) credibility, (ii) unorthodox measures, and (iii) independence. We utilise a survey of more than 550 financial market participants from around the world who...

Exploiting a specific sunspot equilibrium in a standard forward-looking New Keynsian model, we present an example of a possible conflict between short-term price stability and financial stability. We find a conflict because the sunspot process consists of a self-fulfilling belief linking the...

The relevance of this research is caused by the need of strengthening a role of monetary regulators to prevent financial bubbles in the financial markets. The aim of the article is the analysis of a problem of crisis phenomena in the markets of financial assets owing to an inadequate growth of...

We present a microfounded New Keynesian model that features financial vulnerabilities. Financial intermediaries' occasionally binding value-at-risk constraints give rise to variation in the pricing of risk that generates time-varying risk in the conditional mean and volatility of the output gap....