Interest Rate Pass-Through and Monetary Policy Asymmetry: A Journey into the Caucasian Black Box

Monetary Policy, Exchange Rate Flexibility, and Exchange Rate Pass-Through

This paper develops a dynamic general-equilibrium (DGE) model of a small open economy to investigate alternative monetary rules, differing primarily in the degree to which they allow for exchange rate flexibility. A central argument of the paper is that the nature of the trade-off between fixed and floating exchange rates may be quite different in mature industrial economies than in emerging-ma...

Robust monetary policy in a New Keynesian mode lwith imperfect interest rate pass-through

We use robust control to study how a central bank in an economy with imperfect interest rate pass-through conducts monetary policy if it fears that its model could be misspecified. The effects of the central bank’s concern for robustness can be summarised as follows. First, depending on the shock, robust optimal monetary policy under commitment responds either more cautiously or more aggressive...

Expected versus Unexpected Monetary Policy Impulses and Interest Rate Pass-through in Eurozone Retail Banking

This paper follows up on recent studies of the Eurozone interest rate pass-through. Using a generalized empirical approach that allows for a variety of different specifications of the pass-through, including asymmetric adjustment, the role of interest rate expectations, proxied by EURIBOR futures, in determining retail banking product pricing is explored. It is shown that the pass-through is fa...

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...