This paper analyses the ECB communication, focusing in particular on its transparency dimension. We posit that if the ECB is transparent about its future policy decisions, then we should be able to forecast fairly well its future interest rate setting behaviour. We find that the predicting ability of the European monetary authority’s words, is similar to the one implied by market-based measures...

This paper analyses the role of financial variables in the conduct of monetary policy. In the baseline model for the analysis of interest rules, the inflation rate depends on the output gap, which is solely determined by its own lags and the lagged short-term real interest rate. However, from a theoretical point of view there are several other financial variables which may affect aggregate dema...

In this paper we explore the influence of inflation rigidity on the monetary policy transmission mechanism in a model featuring the hybrid Phillips curve. We compare the New Keynesian Phillips curve and the hybrid Phillips curve for their contribution to reproducing stylized empirical facts about business cycles driven by monetary policy shocks. Variables’ induced volatility and the dynamics of...

This paper provides a comparative assessment of the e¤ectiveness of macroprudential policies in 12 Asia-Paci…c economies, using comprehensive databases of domestic macroprudential policies and capital ‡ow management (CFM) policies. We …nd that banking sector CFM polices and bond market CFM policies are effective in slowing down banking in‡ows and bond in‡ows, respectively. We also …nd some evid...

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 ...

This paper relies on the new Keynesian model with in‡ation persistence to characterize the optimal monetary and …scal policy in a liquidity trap. It shows that, with a Phillips curve that is both forward and backward looking, the monetary policy that is implemented during a liquidity trap episode can lift the economy out of depression. The central bank does not need to commit beyond the end of ...

Estimates of instrumental rules can be utilized to describe central bank's behavior and monetary policy stance. In the last decade, considerable attention has been given to time-varying parameter (TVP) specification of monetary policy rules. Constant-parameter reaction functions likely ignore the impact of model uncertainty, shifting preferences and nonlinearities of policymaker's choices. This...

This paper develops a multivariate model to test the effectiveness of monetary and fiscal policy for the economic growth in five Asian Countries (Pakistan, India, Thailand, Indonesia and Malaysia). Most of the previous studies in this area have paid less attention to stationarity, cointegration and causality issues. The series M1 (Money Stock), Government Expenditure, GDP and exports are tested...

The European Monetary Institute have narrowed down the choice of candidate strategies for a single monetary policy within European Monetary Union to inflation targets or monetary aggregate targets. In practice it is unlikely to be a simple choice between these targets, since all monetary authorities that currently pursue either of these strategies also monitor a wide set of economic and financi...