fiscal policy interventions at the zero lower bound we build on a new keynesian dynamic stochastic general equilibrium dsge model to explore the macroeconomic consequences of fiscal expansionary shocks during the economic crisis of 2008 in the eurozone in this setting we find that the big four eurozone economies france germany italy and spain can effectively escape from their liquidity trap through fiscal policy interventions caused by government purchases we estimate the government spending multiplier to be above 1 8 when this policy is associated with a long term commitment to keeping the nominal interest rate at the zero lower bound as suggested by krugman 1998 notably the short term deficit effect on the budget balance can be offset five years after the implementation of a large spending program we also show that alternative policies with tax cuts that expand the supply do not appear to have the same power in the short run moreover we provide novel empirical evidence that a large government debt renders a government spending policy ineffective

international spillovers from us forward guidance to equity markets we quantify the international spillovers of explicit federal open market committee fomc policy rate guidance used as an unconventional monetary policy tool at the zero lower bound of the policy rate on international equity markets considering equity indices of both advanced and emerging economies we find that stimulatory explicit fomc policy rate guidance announcements at the zero lower bound led to higher equity prices in a number of advanced and emerging economies moreover we find that equity indices of economies with lower sovereign ratings rose by more consistent with the risk taking channel of monetary policy

financial market illiquidity shocks and macroeconomic dynamics evidence from the uk we examine the link between financial market illiquidity and macroeconomic dynamics by fitting a bayesian time varying parameter var with stochastic volatility to uk data from 1988q1 to 2016q4 we capture liquidity conditions in the stock market using a battery of illiquidity proxies this paper departs from previous studies examining macro financial linkages by using theoretically grounded sign restrictions and conducting structural inference in a non linear framework we document both statistically significant differences in the transmission of these shocks and substantial increases in the economic importance of these shocks during the 2008 recession

an empirical procedure to evaluate monetary management under exogenous changes in the money supply this article proposes an empirical procedure to evaluate central banks monetary management in a presence of exogenous changes in the money supply monetary shocks deviate the market intere

what is the effect of unconventional monetary policy on bank performance this paper examines the relationship between unconventional monetary policy and the us banking performance unconventional monetary policy is captured through the central bank s assets and excess reserves results show that unconventional monetary policy has a negative relationship with bank performance further analysis shows that the negative association between unconventional monetary policy and performance is mitigated for banks with a high level of asset diversification and low deposit funding we also find that the negative relationship between unconventional monetary policy and performance subdues for deposit insured financial institutions finally we use dynamic panel threshold analysis which reveals that the negative association between unconventional monetary policy and bank performance is particularly pronounced above the reported threshold value

evolutionary finance and central banking this article considers minsky s contribution to evolutionary economics paying attention to his concepts of evolutionary finance and central banking evolutionary finance is defined by minsky as the process through which changes in effective demand uncertainty and cash flows trigger solvency and liquidity risk that increase financial fragility and the possibility of financial instability and debt deflation emphasis is placed on the role of ponzi position making operations and failed margins of safety in inducing low quality leverage and liability structures evolutionary central banking is defined by minsky as the process that central banks use by applying qualitative monetary policy through discount window procedures and lender of last resort interventions to target ponzi leverage structures and financial stability evolutionary central banking provides operational guidelines and objectives that help us understand the monetary policies adopted by central banks after the global financial crisis of 2007 2008 as well as the limitations of the non conventional monetary policies

from conventional to unconventional monetary policies the failure of the market maker of last resort this paper analyses the new role of market maker of last resort openly assumed by central banks since the 2008 financial crisis revealed the increasing impact of noninterest income activities on banks balance sheets a brief review of the distinction between conventional and unconventional monetary policies shows that the inflexion point from lender of last resort to market maker of last resort is given by the extension of central bank intervention to other markets than the bank reserves markets herein it is explained how the market maker of last resort role is as counterproductive as its predecessor in putting the economy back on track we show that the main problem of both conventional and unconventional monetary policies is that they distort price signals particularly asset prices in their attempt to reignite economic growth instead of correcting cyclical fluctuations the policies of the market maker of last resort prevent the cyclical divergences between financial and goods sectors from readjusting

assessing monetary policies in the eurozone u s u k and japan new evidence from the post crisis period abstractthe global financial crisis of 2007 changed the way central banks implement monetary policies this article examines the transmission of both conventional and unconventional monetary polici

a simple general equilibrium model of large excess reserves abstract in a general equilibrium macroeconomic model with a banking system that can hold large excess reserves and is subject to possibly binding capital constraints i study how the quantity of government provided monetary assets is related to the price level in steady state when the central bank does not pay interest on reserves the price level moves one for one with the monetary base if instead the central bank can pay interest on reserves at market rates the price level can decouple from the quantity of monetary assets in the economy a larger monetary base need not imply a higher price level however for large enough levels of reserves the capital constraint binds and the tight link between money and prices reemerges

a reexamination of balassa s productivity bias hypothesis rency by ri s the price level in country i by pi and the price level in the united states by pu s the ppp theory postulates that ri u s pi pu s many studies have tried to verify whether exchange rates follow the path outlined by the ppp equation the empirical results at best are inconclusive for example j a frenkel tested the ppp by drawing data from the 1970s and showed that the ppp failed on the other hand n davutyan and j pippenger criticized frenkel s work and reversed his conclusion 2 both studies used ordinary least squares and two stage least squares methods even recent studies that have used a relatively modern econometric technique cointegration analysis have mostly rejected the ppp 3 several reasons have been given in the literature for the failure of the ppp or deviation of the ppp based exchange rates from equilibrium exchange rates including lack of free trade existence of transaction costs existence of nontradables simultaneity problems different weights used in constructing different national price indexes money and asset prices and real factors or real variables among the real variables the productivity differential between two countries has received most of the attention in the literature if we denote the market determined equilibrium exchange rate by re and the ppp based rate by pi pu s following the literature we

real and monetary determinants of real exchange rate behavior theory and evidence from developing countries abstract this paper develops a dynamic model of real exchange rate rer behavior in developing countries a three goods economy exportables importables and non tradables is considered residents of this country hold domestic and foreign assets and there is a dual exchange rate regime there is a government that consumes importables and non tradables a distinction is made between equilibrium and disequilibrium movements of the rer the determinants of real exchange rate misalignment are studied with emphasis placed on the role of devaluations and balance of payments crises the implications of the model are tested using data for 12 developing countries the results obtained are generally favorable for the model the issue of rer stationarity is also analyzed

quantitative easing in the 1930s during the 1934 39 recovery from the u s great depression overnight interest rates were usually at a lower bound meanwhile american monetary authorities followed policies related to today s debates on quantitative easing they tried to stabilize yields on treasury bonds with open market operations they created rapid growth in high powered money and they allowed transitory factors to affect high powered money effects of these policies on bond yields reveal a portfolio effect of short duration asset supply on term premiums this portfolio effect helps explain why high powered money growth was associated with recovery of real activity over 1934 39

conventional contracts intentional behavior and logit choice equality without symmetry abstract when coordination games are played under the logit choice rule and there is intentional bias in agents non best response behavior we show that the egalitarian bargaining solution emerges as the long run social norm without intentional bias a new solution the logit bargaining solution emerges as the long run norm these results contrast with results under non payoff dependent deviations from best response behavior where it has previously been shown that the kalai smorodinsky and nash bargaining solutions emerge as long run norms we complement the theory with experiments on human subjects results of which suggest that non best response play is payoff dependent and displays intentional bias this suggests the egalitarian solution as the most likely candidate for a long run bargaining norm

evolutionary bargaining with intentional idiosyncratic play abstract we study equilibrium selection in stochastic evolutionary bargaining games in which idiosyncratic play is intentional instead of random in contract games the stochastically stable state selected by intentional idiosyncratic play is the nash bargain rather than the usual kalai smorodinsky solution

the macroeconomic effects of large scale asset purchase programmes the effects of asset purchase programs on macroeconomic variables are likely to be moderate we reach this conclusion after simulating the impact of the federal reserve s second large scale asset purchase program lsap ii in a dsge model enriched with a preferred habitat framework and estimated on u s data our simulations suggest that such a program increases gdp growth by less than half a percentage point although the effect on the level of gdp is very persistent the program s marginal contribution to infl ation is very small one key reason for our fi ndings is that we estimate a small degree of fi nancial market segmentation if we enrich the set of observables with a measure of long term debt the semi elasticity of the risk premium to the amount of debt in privatesector hands is substantially smaller than that reported in the recent empirical literature in this case our baseline estimates of the effects of lsap ii on the macroeconomy decrease by at least a factor of two throughout the analysis a commitment to an extended period at the zero lower bound for nominal interest rates increases the effects of asset purchase programs on gdp growth and infl ation

an evolutionary model of bargaining abstract individuals from two populations of bargainers are randomly matched to play the nash demand game they make their demands by choosing best replies based on an incomplete knowledge of the precedents and occasionally they choose randomly there is no common knowledge over the long run typically one division will be observed almost all of the time this stochastically stable division is close to the nash solution when all agents in the same population are alike when the populations are heterogeneous a generalization of the nash solution results if there is some mixing between the two populations the stable division is fifty fifty journal of economic literature classification number c78

a prospect theory nash bargaining solution and its stochastic stability abstract we consider the long run outcomes of bargaining games when players obey prospect theory we extend the evolutionary bargaining model of young 1993 to a two stage nash demand game two players simultaneously choose whether to exercise an outside option in the first stage and play the nash demand game in the second stage which will be reached only if neither player exercises the outside option we address the influence on the stochastically stable division of reference dependent preferences where the reference point is the value of the outside option we show that the division consistently differs from the nash bargaining solution under expected utility theory inspired by this we propose a prospect theory nash bargaining solution which coincides with the stochastically stable division

mortgage debt consumption and illiquid housing markets in the great recession using a model with housing search endogenous credit constraints and mortgage default this paper accounts for the housing crash from 2006 to 2011 and its implications for aggregate and cross sectional consumption during the great recession left tail shocks to labor market uncertainty and tighter down payment requirements emerge as the key drivers an endogenous decline in housing liquidity amplifies the recession by increasing foreclosures contracting credit and depressing consumption balance sheets act as a transmission mechanism from housing to consumption that depends on gross portfolio positions and the leverage distribution low interest rate policies accelerate the recovery in housing and consumption

explaining service price differences in international comparisons this paper reexamines observed international differences in the price of services and the positive correlation of these with per capita gdp differences using a general trade model with a nontraced sector the authors find that differences in countries factor endowments populations trade policies and trade balances will have ambiguous and sometimes opposite effects on their service prices and real incomes estimating the service price equation using recent data suggests that larger endowments of agricultural land minerals and capital larger trade deficits and higher prices for tradables increase service prices conversely larger populations and labor forces reduce service prices copyright 1991 by american economic association

the relevance or otherwise of the central bank s balance sheet abstract this paper explores the impacts on an economy of a central bank changing the size and composition of its balance sheet one of the ways in which such asset purchases could influence prices and demand is via portfolio balance effects we develop and calibrate a simple olg model in which risk averse households hold money and bonds to insure against risk central bank asset purchases have the potential to affect households choices by changing the composition and return of their asset portfolios we find that the effect is weak and that its size depends on how fiscal policy is conducted that is not to say that the big expansion of central bank balance sheets in recent years has been ineffective our finding is rather that the portfolio balance channel evaluated in an environment of normally functioning though nonetheless incomplete asset markets is weak that is not inconsistent with the evidence that large scale asset purchases by central banks since 2008 have had significant effects because those purchases were made when financial markets were to varying extents dysfunctional nonetheless our results are relevant to those purchases because they may be unwound in an environment where financial markets are no longer dysfunctional

tobin s imperfect asset substitution in optimizing general equilibrium in this paper we present a dynamic optimizing model that allows explicitly for imperfect substitutability between different financial assets this is specified in a manner which captures tobin s 1969 view that an expansion of one asset s supply affects both the yield on that asset and the spread or risk premium between returns on that asset and alternative assets our estimates of this model on u s data confirm that some of the observed deviations of long term rates from the expectations theory of the term structure can be traced to movements in the relative stocks of financial assets the richer aggregate demand and asset specifications imply that there exists an additional channel of monetary policy our results suggest that central bank operations exercise a modest influence on the relative prices of alternative financial securities and so exert an extra effect on long term yields and aggregate demand separate from their effect on the expected path of short term rates

the euro area bond free float and the implications for qe this paper examines how shocks to government bond duration risk held by price sensitive investors affect the euro area term structure of interest rates and the wider macroeconomy we construct a new measure of the bond free float which adjusts total debt for foreign official holdings and weights by residual maturity using a small macrofinance bayesian vector autoregression var model we estimate that the first round of asset purchases under the european central bank s ecb public sector purchase program reduced euro area 10 year bond yields by around 30 bps in 2015 the positive impact on the output gap and inflation in 2016 was about 0 2 and 0 3 ppt respectively

stochastic stability under logit choice in coalitional bargaining problems abstract this study examines a dynamic process of n person coalitional bargaining problems we investigate the evolution of social conventions by embedding a coalitional bargaining setting in a dynamic process in each period a group of players may make some coalitional move that is forming a new team or negotiating the division of a surplus players revise their coalitions and surplus divisions over time in the presence of stochastic noise which leads players to make a suboptimal decision under a logit specification of choice probabilities we find that the stability of a core allocation decreases in the wealth of the richest player furthermore stochastically stable allocations are core allocations that minimize the wealth of the richest player

productivity bias hypothesis and the purchasing power parity a review article abstract productivity differentials among countries are said to be one of the major sources that contribute to the deviation of the purchasing power parity based exchange rate from the equilibrium rate hence the productivity bias hypothesis prior to last review article on the productivity bias hypothesis in 1976 almost all studies relied upon cross sectional regression analysis since then two groups of empirical studies have emerged while one group has employed time series data the other one has used panel data these two later groups have provided more support to the hypothesis than the earlier cross sectional studies this paper reviews and criticizes each group separately and provides tables that summarize main features of each study

international effects of a compression of euro area yield curves abstract in this paper we use a bayesian global vector autoregressive model to analyze the macroeconomic effects of a flattening of euro area yield curves our findings indicate positive effects on real activity and prices both within the euro area as well as in neighboring economies spillovers transmit through an exchange rate channel and a broad financial channel we complement our analysis by conducting a portfolio optimization exercise our results show that multi step ahead forecasts conditional on the euro area yield curve shock improve sharpe ratios relative to other investment strategies

assessing the economy wide effects of quantitative easing this article examines the macroeconomic impact of the first round of quantitative easing qe by the bank of england we attempt to quantify the effects of these purchases by focusing on the impact of lower long term interest rates on the wider economy we use three different models to estimate the impact of qe on output and inflation a large bayesian vector autoregression var a change point structural var and a time varying parameter var our estimates suggest that qe may have had a peak effect on the level of real gdp of around and a peak effect on annual cpi inflation of about points

monetary policy in exceptional times this paper describes the way in which the european central bank ecb the federal reserve and the bank of england conducted monetary policy since the beginning of the financial crisis in august 2007 we argue that both quantitative easing and the other non standard measures introduced by central banks that changed the composition of the asset side of their balance sheets so called qualitative easing acted mainly through their effects on interest rates and in particular on money market spreads rather than solely through quantity effects in terms of the money supply we perform a quantitative exercise on the euro area which estimates the effect of the reduction of these spreads to the broader economy michele lenza huw pill and lucrezia reichlin

perturbed adaptive dynamics in coalition form games abstract players adaptively learn how to bargain a characteristic function describes the available surplus the underlying bargaining game extends the nash demand game by allowing subcoalitions to reach an agreement players demands must be multiples of a money unit we show that stochastically stable allocations ssa i e allocations that are most stable to unlikely errors are a subset of the core uniqueness does not obtain even when the money unit becomes arbitrarily small nonetheless every ssa is related to the allocation that maximizes the product of players utilities over the core i e constrained egalitarian solution for tu games journal of economic literature classification numbers c71 c72 c78

optimal monetary interventions in credit markets in an environment based on lagos and wright 2005 but with two rounds of pairwise meetings we introduce imperfect monitoring that resembles operations of unsecured loans we characterize the set of implementable allocations satisfying individual rationality and pairwise core in bilateral meetings we introduce a class of expansionary monetary policies that use the seignorage revenue to purchase privately issued debts we show that under the optimal trading mechanism both money and debt circulate in the economy and the optimal in ation rate is positive except for very high discount factors under which money alone achieves the rstbest our model captures the view that unconventional monetary policy encourages lending while it may create in ation

the impact of monetary policy on corporate bonds under regime shifts abstract we study the effects of a conventional monetary expansion quantitative easing and the maturity extension program on corporate bond yields using impulse response functions obtained from flexible models with regimes using a three state markov switching model with time homogeneous vector autoregressive var coefficients that emerges from a systematic model specification search we find that unconventional policies may have been generally expected to decrease both corporate yields and spreads however even though the sign of the responses is the one desired by policymakers the size of the estimated effects depends on the assumptions regarding the decline in long term treasury yields caused by unconventional policies on which considerable uncertainty remains further tests based on yield spreads and a variable that measures inflation expectations show that in the crisis regime unconventional monetary policies do not produce any perverse effects on expected inflation these results prove robust to adopting a framework that allows var coefficients to break to imposing coefficient restrictions that increase parsimony and to a range of different ordering schemes that identify shocks in alternative ways

structural determinants of real exchange rates and national price levels some empirical evidence contrary to the long held notion of purchasing power parity ppp economists have found systematic evidence that the general level of prices across countries at a point in time varies dramatically irving b kravis alan w heston and robert summers 1982 for example report that some countries national price levels are no more than one third the u s price level extensions of this work show that such departures from ppp have persisted for decades recently efforts have been made to explain systematically these persistent or structural departures from ppp pioneering work by kravis and robert e lipsey 1983 1987 1988 has demonstrated that a positive correlation between the price level and real per capita gross domestic product is robust across numerous cross sectional specifications for instance using data from kravis et al 1982 table 6 12 87 percent of the variation in national price levels pl of 21 countries in 1975 is explained by per capita gdp y and a constant

the response of interest rates to us and uk quantitative easing we analyse declines in government bond yields following announcements by the federal reserve and the bank of england of plans to buy longer term debt using dynamic term structure models we decompose us and uk yields into expectations about future short term interest rates and term premiums we find that declines in us yields mainly reflected lower expectations of future short term interest rates while declines in uk yields appeared to reflect reduced term premiums thus the relative importance of the signalling and portfolio balance channels of quantitative easing may depend on market institutional structures and central bank communication policies

quantitative easing and unconventional monetary policy an introduction this article assesses the impact of quantitative easing and other unconventional monetary policies followed by central banks in the wake of the financial crisis that began in 2007 we consider the implications of theoretical models for the effectiveness of asset purchases and look at the evidence from a range of empirical studies we also provide an overview of the contributions of the other articles in this feature

international money supply and real estate risk premium the case of the london office market abstract the main purpose of this study is to deeply investigate the determinants of the risk premium for the central london market between q2 2002 and q3 2015 using a vector autoregression var model we shed new light on the role of central banks in the historical level of the commercial real estate risk premium indeed since the global financial crisis gfc central banks have used unconventional monetary policies increasing the quantity of money available in the economy and creating structural changes therefore we have described the link between monetary policies and real estate using a theoretical is lm mundell fleming framework for a small open economy with a flexible exchange rate to empirically explore this phenomenon we have constructed a monetary index adapted to the office market we find that throughout the whole period 2002 2015 the vacancy rate the employment in services the ftse 100 the new monetary index and the autoregressive parameter are the main determinants of the historical risk premium however this result hides the complex realities of different sub periods finally we study the structural changes introduced by the monetary policy using a structural var model and impulse response function

the ecb and the interbank market this paper analyses the impact on the macroeconomy of the ecb s non standard monetary policy implemented in the aftermath of the collapse of lehman brothers in the fall of 2008 we study in particular the effect of the expansion of the intermediation of transactions across central bank balance sheets as dysfunctional financial markets seize up which we regard as a key channel of transmission for non standard monetary policy measures our approach is similar to lenza et al 2009 but we introduce the important innovation of distinguishing between private intermediation of interbank transactions in the money market and central bank intermediation of bank to bank transactions across the eurosystem balance sheet we do this by exploiting data drawn from the aggregate monetary and financial institutions mfi balance sheet which allows us to construct a new measure of the policy shock represented by the ecb s increasing role as a financial intermediary we find that bank loans to households and in particular to non financial corporations are higher than would have been the case without the ecb s intervention in turn the ecb s support has a significant impact on economic activity two and a half years after the failure of lehman brothers the level of industrial production is estimated to be 2 higher and the unemployment rate 0 6 percentage points lower than would have been the case in the absence of the ecb s non standard monetary policy measures

the logit response dynamics we develop a characterization of stochastically stable states for the logit response learning dynamics in games with arbitraryspecification of revision opportunities the result allows us to show convergence to the set of nash equilibria in the class of best response potential games and the failure of the dynamics to select potential maximizers beyond the class of exact potential games we also study to which extent equilibrium selection is robust to the specificationof revision opportunities our techniques can be extended and applied to a wide class of learning dynamics in games

the determination of the real exchange rate the productivity approach abstract this paper explains deviations of exchange rates from purchasing power parity with the differences between countries of the relative growth rates of labor productivity between traded and nontraded sectors two cases are considered germany and japan versus their respective major trading partners the results show that the time series methodology yields a more favorable confirmation of the productivity differential model than the cross section regressions in the literature

inflation employment and monetary policy objectives and outcomes in the uk and u s compared this paper explores how sensitive is monetary policy to the precise preferences of the central bank over inflation and economic activity it does so in order to address a puzzle which is that the u s fed and the bank of england appear to have quite different objectives and yet have adopted strikingly similar policies in recent years i use a calibrated model to assess how policy might be sensitive to attaching different weights to inflation output and the output gap in central bank objectives i find that a wide range of weights can give rise to rather similar monetary policies

assessing the effects of unconventional monetary policy and low interest rates on pension fund risk incentives this study quantifies the effects of persistently low interest rates near to the zero lower bound and unconventional monetary policy on pension fund risk incentives in the united states using two structural vector autoregressive var models and a counterfactual scenario analysis the results show that monetary policy shocks as identified by changes in treasury yields following changes in the central bank s target interest rates lead to a substantial increase in pension funds allocation to equity assets notably the shift from bonds to equity securities is greater during the period where the us federal reserve launched unconventional monetary policy measures additional findings show a positive correlation between pension fund risk taking low interest rates and the decline in treasury yields across both well funded and underfunded public pension plans which is thus consistent with a structural risk shifting incentive

the equal loss principle for bargaining problems abstract we introduce a new bargaining solution which we call the equal loss solution this solution equalizes across agents the losses from the ideal point two characterizations of the solution are presented by formulating axioms specifying how bargaining solutions should respond to changes in the feasible set and the ideal point

coalitional stochastic stability abstract this paper takes the idea of coalitional behavior groups of people occasionally acting together to their mutual benefit and incorporates it into the framework of evolutionary game theory that underpins the social learning literature an equilibrium selection criterion is defined which we call coalitional stochastic stability css this differs from existing work on stochastic stability in that profitable coalitional deviations are given greater importance than unprofitable single player deviations a general characterization of css is given together with more detailed characterizations for specific classes of games applications include contracting asymmetric social norms and collusive price setting the latter of which is shown in some circumstances to facilitate competitive outcomes

unconventional economic policies and sentiment an international assessment this paper estimates using bayesian and global vars the spillover effects of unconventional fiscal and monetary policies implemented in the united states and in the eurozone during the last decade consumer confidence and investor sentiment indicators are introduced in the models in order to highlight the signalling channel in the responses to economic policy innovations in times of crisis our results reveal that consumer and investor perceptions of innovative economic measures are relevant to study the pass through of economic policies to the real sector in times of crisis and zero lower bound interest rates in particular the signalling channel plays an important role in successful unconventional economic policies moreover if unconventional economic policies have an impact abroad the effects are similar to those measured in the domestic country region consequently coordination and transparency are a prerequisite for ensuring short term growth after a global financial crisis

risk attitudes and risk dominance in the long run abstract this paper investigates the role that risk attitudes play in the evolution of conventions in the long run risk aversion is shown to be associated with the evolution of maximin conventions and risk seeking with the evolution of payoff dominant conventions

the effectiveness of alternative monetary policy tools in a zero lower bound environment this paper reviews alternative options for monetary policy when the shortterm interest rate is at the zero lower bound and develops new empirical estimates of the effects of the maturity structure of publicly held debt on the term structure of interest rates we use a model of risk averse arbitrageurs to develop measures of how the maturity structure of debt held by the public might affect the pricing of level slope and curvature term structure risk we find that these treasury factors historically were quite helpful for predicting both yields and excess returns over 1990 2007 the historical correlations are consistent with the claim that if in december 2006 the fed were to have sold off all its treasury holdings of less than 1 year maturity about 400 billion and use the proceeds to retire treasury debt from the long end this might have resulted in a 14 basis point drop in the 10 year rate and an 11 basis point increase in the 6 month rate we also develop a description of how the dynamic behavior of the term structure of interest rates changed after hitting the zero lower bound in 2009 our estimates imply that at the zero lower bound such a maturity swap would have the same effects as buying 400 billion in long term maturities outright with newly created reserves and could reduce the 10 year rate by 13 basis points without raising short term yields

the effectiveness of the ecb s unconventional monetary policy comparative evidence from crisis and non crisis euro area countries abstract during the european financial crisis the european central bank implemented a series of unconventional monetary policy measures we argue that these programs lowered the bond yield spreads of euro area countries this hypothesis is tested using pooled ols estimations and two different datasets monetary policy event dummies and the purchase volumes of the securities markets programme smp overall we find significantly negative effects on bond yield spreads for both datasets leading us to accept the hypothesis while the omt reduces the spreads of both crisis and non crisis countries ltros and the lowering of the deposit rate to 0 percent are mainly effective in non crisis countries the smp lowers the spreads of crisis countries but it has the opposite effect on non crisis countries this converse effect is explained by the risk that increasingly accumulates on the ecb s balance sheet through the smp and that way constitutes a fiscal risk for non crisis countries the results are confirmed by pooled ols estimations that measure the effect of unconventional monetary policy on central government debt

the federal reserve s large scale asset purchase programmes rationale and effects we provide empirical estimates of the effect of large scale asset purchases lsaps on longer term us treasury yields within a framework that allows for several transmission channels including the scarcity channel associated with the preferred habitat literature and the duration channel associated with interest rate risk we also clarify lsaps role in the broader context of historical monetary policy strategy results indicate that lsap style operations mainly impact longer term rates via the nominal term premium within that premium the response is predominantly embodied in the real term premium the scarcity and duration channels both seem to be of considerable importance

cross border spillover effects of unconventional monetary policies on swiss asset prices abstract unconventional monetary policies umps announced by the federal reserve the european central bank the bank of england and the bank of japan exert important spillover effects on asset prices in switzerland using a broad ump event set and a long term bond futures based measure of market anticipation we show that surprisingly expansionary umps lower swiss government and corporate bond yields induce the swiss franc to appreciate and dampen swiss equity prices four extensions provide further insights first the estimated effects are strongest for announcements by the ecb second the impact on government bonds is largest for bonds with residual maturities of 7 10 years third the impact of foreign ump shocks on exchange rates and swiss bond yields is less pronounced after the introduction of the minimum rate of 1 20 swiss franc per euro by the swiss national bank on september 6 2011 indicating that domestic monetary policy action partially affects the impact of external monetary shocks on domestic financial markets fourth the sign of spillover effects differs for positive and negative ump surprises but their strength does not

the risk taking channel of monetary policy transmission in the euro area abstract in this paper we provide evidence for a risk taking channel of monetary policy transmission in the euro area that works through the relaxation of lending standards for borrowers our dataset covers the period 2003q1 2016q2 and includes in addition to the standard variables for real gdp growth inflation and the monetary policy stance indicators of bank lending standards and bank lending margins based on vector autoregressive models with i recursive identification and ii sign restrictions we show that banks react aggressively to an expansionary monetary policy shock by lowering their lending standards the banks efforts to keep their lending margin stable however are not successful as we detect a significant compression we document these findings for the euro area as a whole and for its individual member states in particular banks in the netherlands portugal spain and ireland lowered their lending standards after expansionary monetary policy shocks the compression of the lending margin is most pronounced in the five crisis countries greece ireland italy portugal and spain

estimating long run economic equilibria with stochastic trends an asymptotic theory is provided to analyze a menu of currently existing estimators of cointegrated systems we study in detail the single equation ecm seecm approach of hendry our theoretical results lead to prescriptions for empirical work such as specifying seecm s nonlinearly and including lagged equilibrium relationships rather than lagged differences of the dependent variable as covariates simulations support these prescriptions and point to problems of overfitting not encountered in the semiparametric approach of phillips and hansen 1990

announcements of ecb unconventional programs implications for the sovereign spreads of stressed euro area countries abstract this paper studies the effects of ecb communications about unconventional monetary policy operations on the sovereign spreads of greece ireland italy portugal and spain relative to germany between 2008 and 2012 more than fifty events concerning non standard operations are identified and classified with respect to the specific ecb program the empirical results suggest that the ecb announcements about unconventional monetary policies substantially reduced long term government bond yield spreads relative to german counterparts in all countries except greece particularly among the different types of measures news about the securities markets programme strongly affected the perceived sovereign risk of the five stressed euro area countries while the announcements of the outright monetary transactions seem to have a significant impact only in italy and spain

learning efficient nash equilibria in distributed systems abstract an individual s learning rule is completely uncoupled if it does not depend directly on the actions or payoffs of anyone else we propose a variant of log linear learning that is completely uncoupled and that selects an efficient welfare maximizing pure nash equilibrium in all generic n person games that possess at least one pure nash equilibrium in games that do not have such an equilibrium there is a simple formula that expresses the long run probability of the various disequilibrium states in terms of two factors i the sum of payoffs over all agents and ii the maximum payoff gain that results from a unilateral deviation by some agent this welfare stability trade off criterion provides a novel framework for analyzing the selection of disequilibrium as well as equilibrium states in n person games

recontracting and stochastic stability in cooperative games abstract an evolutionary style model of recontracting is given which guarantees convergence to core allocations of an underlying cooperative game unlike its predecessors in the evolution learning literature this is achieved without assumptions of convexity of the characteristic function or a reliance on random errors the stochastic stability properties of the model are then examined and it is shown that stochastically stable states solve a simple and intuitive minimization problem which reduces to maximizing a rawlsian swf for a common class of utility functions in contrast to previous analyses the stochastically stable state is unique for a broad class of utility functions

have we underestimated the likelihood and severity of zero lower bound events prior to the financial crisis most economists probably did not view the zero lower bound zlb as a major problem for central banks using a range of structural and statistical models we find that previous research understated the zlb threat by ignoring uncertainty about model parameters and latent variables focusing too much on the great moderation experience and relying on structural models whose dynamics cannot generate sustained zlb episodes our analysis also suggests that the federal reserve s asset purchases while materially improving macroeconomic conditions did not prevent the zlb constraint from having first order adverse effects on real activity and inflation