This paper presents empirical evidence on the behaviour of interbank lending in Germany after a monetary policy impulse. Our VAR analysis shows that following a monetary contraction, the banking system as a whole attracts additional funds from foreign banks. Whereas small cooperative and savings banks do not seem to directly access the interbank market themselves, they do so indirectly through ...

Evidence of smooth transition autoregressive (STAR) representations is found in two, out of three, time series of different measures of annual inflation in Colombia during this decade for monthly data. The STAR-type nonlinearities are asymmetric for inflation computed as the variation of CPI while for (a measure of ) core inflation are symmetric. Thus, LSTAR and ESTAR models were, respectively,...

This paper compares the Calvo model with the Rotemberg model in a fully nonlinear dynamic new Keynesian framework with an occasionally binding zero lower bound (ZLB) on nominal interest rates. Although the two models are equivalent to a first-order approximation, they generate very different results regarding the policy functions and the government spending multiplier based on nonlinear solutio...

A growing empirical and theoretical literature argues in favor of specifying monetary policy in the form of Taylor-type interest rate feedback rules. That is, rules whereby the nominal interest rate is set as an increasing function of inflation with a slope greater than one around an intended inflation target. This paper shows that because of the zero bound on nominal interest rates, such rules...

The author explores the role that Taylor-type rules can play in monetary policy, given the degree of uncertainty in the economy. The optimal rule is derived from a simple infinite-horizon model of the monetary transmission mechanism, with only additive uncertainty. The author then examines how this rule ought to be modified when there is uncertainty about the parameters, the time lags, and the ...

We document heterogeneity in the marginal propensity to consume (MPC) across household characteristics relevant understanding heterogeneous agent models and monetary policy transmission. find a strong negative relationship between liquid wealth MPC. show that predicts MPC closely for every other characteristic we look at. use new empirical method overcomes sources of bias found existing literat...

Commonly used instruments for the identification of monetary policy disturbances are likely to combine true shock with information about state economy due disclosed through action. We show that this signaling effect can give rise empirical puzzles reported in literature, and propose a new high-frequency instrument shocks accounts informational rigidities. find tightening is unequivocally contra...

We revisit the usefulness of long-run money demand equations for the European Central Bank. We first conduct a model evaluation exercise by means of a recent time–varying cointegration test. A stable relation for euro area M3 is not rejected by data only when accounting for both a speculative motive, represented by international financial markets, and a precautionary motive, proxied by changes ...

We use Bayesian time-varying parameters VARs with stochastic volatility to investigate changes in the marginal predictive content of the yield spread for output growth in the United States and the United Kingdom, since the Gold Standard era, and in the Eurozone, Canada, and Australia over the post-WWII period. Overall, our evidence does not provide much support for either of the two dominant ex...

We developed a simple monetary model to study the effects of tax evasion on the optimal inflation tax. The model is constructed so that inflation might be an indirect way of taxing the underground sector of the economy. We show that while there are theoretical reasons for positive optimal inflation rates, the effects are quantitatively small, even in countries with large underground sectors. We...