Explore the vast range of titles available.

We introduce a dynamic panel threshold model to estimate inflation thresholds for long-term economic growth. Advancing on Hansen (J Econom 93:345–368, 1999 ) and Caner and Hansen (Econom Theory 20:813–843, 2004 ), our model allows the estimation of threshold effects with panel data even in case of endogenous regressors. The empirical analysis is based on a large panel-dataset including 124 countries. For industrialized countries, our results confirm the inflation targets of about 2% set by many central banks. For non-industrialized countries, we estimate that inflation rates exceeding 17% are associated with lower economic growth. Below this threshold, however, the correlation remains insignificant.

Since the run-up to the great recession, there has been a significant degree of heterogeneity across euro area countries both in terms of interest rates and in the composition of monetary assets. In order to account for the heterogeneity of monetary assets within and across member countries, we propose a Divisia monetary aggregate for the euro area. In line with earlier evidence obtained for the United States, our results from a panel probit analysis show that the divergence between the Divisia and the simple sum aggregate has a significant predictive content for recessions in euro area countries.

This paper introduces structural VAR analysis as a tool for investigating the anchoring of inflation expectations. We show that US consumers' inflation expectations are anchored in the long run because macro-news shocks are long-run neutral for long-term inflation expectations. The identification of structural shocks helps to explain why inflation expectations deviate from the central bank's target. Our results indicate that the recent decline in long-term inflation expectations does not result from deanchoring macro-news but can be attributed to downward adjustments in consumers' expectations about the central bank's inflation target.

This paper investigates how financial experts perceive the monetary policy of the European Central Bank (ECB). Assuming a Taylor-rule-type reaction function, we use qualitative survey expectations about future interest rates, inflation, and output to discover the sources of individual interest rate forecast errors. Based on a panel random coefficient model, we show that financial experts have systematically misperceived the ECB's interest rate rule. While perception of monetary policy regarding inflation has become more accurate since the ECB's clarification of the monetary policy strategy in 2003, misperception regarding the ECB's reaction to output has increased in the financial crisis.

Until June 2000 the European Central Bank (ECB) used fixed rate tenders for its weekly repo auctions. A switch to variable rate tenders became necessary due to massive overbidding by banks. In this paper we introduce a stylized game among banks to investigate this overbidding phenomenon. Our results confirm the weakness of the fixed rate tender format and indicate that the ECB's liquidity management has significantly improved since the switch to the variable rate system. Yet recent episodes of rate cut expectations suggest that the ECB's practice of setting a minimum bid rate should be abandoned in favor of a more symmetric interest rate target.

The maturity of the operational target of monetary policy is a distinguishing feature of the SNB's operational framework of monetary policy. While most central banks use targets for the overnight rate to signal the policy-intended interest rate level, the SNB announces a target range for the three-month Libor. This paper investigates the working and the consequences of the SNB's unique operational framework for the behavior of Swiss money market rates before and during the financial crisis.

The instability of standard money demand functions has undermined the role of monetary aggregates for monetary policy analysis in the euro area. This paper uses country-specific monetary aggregates to shed more light on the economics behind the instability of euro area money demand. Our results obtained from panel estimation indicate that the observed instability of standard money demand functions could be explained by omitted variables like e.g. technological progress that are important for money demand but constant across member countries.

This article provides new evidence on the empirical relationship between inflation and relative prices in the United States. In line with the predictions of recent monetary search models, we find that the impact of expected inflation on relative price variability (RPV) has disappeared during the recent period when inflation expectations have been stabilized on a low level. Endogenous break-point tests are applied to identify the timing and to confirm the significance of the changing role of inflation for RPV. The empirical findings are robust with respect to different price indices, disaggregation levels, and measurement concepts.

We use a representative online survey to investigate the inflation expectations of German consumers and the credibility of the ECB's inflation target during the recent high inflation period. We find that credibility has trended downwards since summer 2021, reaching an all-time low in April 2022. The high correlation between inflation expectations and the actual rate of inflation strongly indicate that inflation expectations have been de-anchored from the inflation target. With increasing inflation, German consumers are more convinced that - in contrast to the ECB's inflation target - inflation will be well above 2% over the medium term.