Foreign Interest Rate, Monetary Policy and Bank Credit

Global Knowledge, Local Solutions: Interest Rate and Monetary Policy

Monetary Policy Committees and Interest Rate Smoothing

We extend the New Keynesian Monetary Policy literature relaxing the assumption that the decisions are taken by a single policymaker, considering instead that monetary policy decisions are taken collectively in a committee. We introduce a Monetary Policy Committee (MPC), whose members have different preferences between output and inflation variability and have to vote on the level of the interes...

Optimal versus realized bank credit risk and monetary policy

Standard banking theory suggests that there exists an optimal level of credit risk that yields maximum bank profit. We identify the optimal level of risk-weighted assets that maximizes banks’ returns in the full sample of US banks over the period 1996–2011. We find that this optimal level is cyclical for the average bank, being higher than the realized credit risk in relatively stable periods w...

Interest Rate Rules and the Credit Channel of Monetary Policy Transmission

This paper develops a general equilibrium model with the banking system and the reserves market, where the central bank a¤ects the federal funds rate through open market operations. We show that when the coe¢ cient that measures the response of the federal funds rate to the in‡ation rate falls below a threshold value, which is very small, the economy will have two steady states, where the low-e...

Central Bank Transparency and Monetary Policy Effectiveness

The paper concentrates on the conditions, contingencies and determinants of central bank transparency and communication. From the state of the economy and the quality of national institutions, to the structure of monetary policy committees, the personality of the governor and the nature of the monetary policy framework - with a particular focus on the case of inflation targeting, there i...