The third stage of the Economic and Monetary Union will start on January 1st, 1999, at which point the currencies of the participating countries will be irrevocably fixed as the prelude to the introduction of the euro by 2002. Although the European System of Central Banks’ objective is...

This paper analyzes and extends the original study by Borio (2013), which includes proxies for the financial cycle in the process for estimating potential output. We extend the estimation to more countries (USA, UK, Spain, Italy, France, Austria, Netherlands and Switzerland) to check the...

We analyze the impact of financial crises and monetary policy on the supply of wholesale funding liquidity, and also on the compositional supply effects through cross-border and relationship lending. For empirical identification, we draw on the proprietary bank-to-bank European interbank dataset...

Capturing the boom phase of Pigou cycles and resolving the comovement problem requires positive sectoral comovement. This paper addresses these observations using a two sector New Keynesian model. Price rigidities dampen movements in the relative price of durables following a monetary policy...

In a neoclassical growth model with life-cycle households in which money is held to satisfy a cash-in-advance constraint, the optimal steady state inflation rate is not the Friedman rule -- it is in excess of $20\%$. Lump-sum, age-independent money injections twist and flatten the lifetime...

We explore the stability properties of interest rate rules granting an explicit response to stock prices in a New-Keynesian DSGE model populated by Blanchard-Yaari non-Ricardian households. The constant turnover between long-time stock holders and asset-poor newcomers generates a financial...

This paper explores the effect of U.S. unconventional monetary policy (QE2) on a group of frontier developing economies (FDEs) in Asia. This paper finds that spillovers emanating from the U.S. on FDEs in Asia have been small. The relative insulation of emerging Asia from the global financial...

This paper extends Dornbusch's overshooting model by proposing a generalized interest parity condition (GIP), which captures a sluggish adjustment on the asset market. The exchange rate model under the GIP is able to reproduce the delayed overshooting and the hump-shaped response to monetary...

The paper analyses the empirical relationship between bank risk and sovereign credit risk in the euro area. Using structural VAR with daily financial markets data for 2003-13, the analysis confirms two-way causality between shocks to sovereign risk and bank risk, with the former being overall...