T he present paper investigates the impact of the financial crisis on the interaction between the lending rates, deposit rates and money market rates through the process of retail bank interest rate pass-through in the countries of the Euro area. Among our findings is the heterogeneity of bank rate adjustments across sectors, loans and deposits. That was mainly marked during the pre-...

Some of the recent literature on robust control in economics (for instance, Giannoni [3], Hansen and Sargent [4] and [5], Onatski [6], Onatski and Stock [7], Sargent’s [10] comment on Ball, [1] and Stock’s [12] comment on Rudebusch and Svensson [9]) is somewhat technical and difficult to see through. This note attempts to use a simple example of optimal monetary policy to convey the gist of rob...

This paper investigates the evolution of monetary policy in the U.S. using a standard set of macroeconomic variables. Many recent papers have addressed the issue of whether the monetary transmission mechanism has changed (e.g. due to the Fed taking a more aggressive stance against in‡ation) or whether apparent changes are simply due to changes in the volatility of exogenous shocks. A subsidiary...

Modern monetary policy theory and practice have been heavily influenced by the experiences of developed countries, both large and small. A number of these ideas have also made their way into policymaking at central banks in emerging economies, mostly due to the absence of local intellectual alternatives. However, the realities of emerging economies are often at odds with the circumstances of de...

Under bond-rate transmission of monetary policy, we show a generalized Taylor Principle requires a lower bound to the average anticipated path of policy responses. This result helps explain the puzzling observation that bond rates appear to exhibit stable responses to inflation, even in periods of passive policy. Another possible explanation is time-varying term premia with risk pricing that de...

This paper argues that the existence of bank networks is important for banks ́ reaction to monetary policy. For the example of Germany, the VAR analysis shows that following a monetary contraction small banks access the interbank market indirectly through the head institutions of their respective network organisations. The interbank flows within these networks allow small banks to access funds t...

The U.S. economy is continually buffeted by disturbances originating both within and outside our borders. To assess the influence of such events on employment, inflation, and other measures of macroeconomic performance, economists often use models of the economy—systems of mathematical equations describing the interactions among various measures of activity in the markets for labor, goods, and ...