Does a less expansionary monetary policy, for example, an increase in interest rates, lead to lower inflation and dampened inflation expectations? Many empirical and theoretical studies suggest that it does. A new study, however, shows that, if inflation expectations diverge widely, a less expansionary monetary policy can lead to increased inflation and higher inflation expectations.

The productivity of many firms evolves over time. This impacts on the optimal inflation rate – the rate of price increase with the least distortionary effect on relative goods prices. Our estimates for the United States suggest that, due to firm-level productivity changes, the optimal inflation rate has dropped from somewhat over 2% in the mid-1980s to a current level of roughly 1%.

The Eurosystem’s monetary policy is geared towards macroeconomic developments over the entire euro area. Does it produce different effects in the individual member states? And, if yes, how big are the differences? Our empirical study on interest rate policy examines this question for Germany, France, Italy and Spain, the four largest economies in the euro area.

Households in Germany are expecting interest rates to stay low over the relatively long haul, with many intending to adjust their saving behaviour in response. These are two of the key findings from the 2016 Panel on Household Finances (PHF) summer survey.

The years following the 2007-08 financial crisis saw central banks in the United States and other industrialized countries adopt highly expansionary monetary policy measures in an effort to stimulate the economy. But how effective have those policies been? A new study explores how effective an expansionary monetary policy stance can be in such turbulent times.

A new EU regulation sheds the first light on the hitherto hidden practices of short sellers. This legislation requires short positions to be made public as soon as they exceed a certain threshold. How are market participants responding to this new transparency? A new study looks into this question.

Demand in the USA and other industrial nations collapsed dramatically during the financial crisis and yet this did not lead to deflation. The reasons for this have still not been fully explained. A new study examines the extent to which financial shocks have a bearing on the path of inflation.

An oft-repeated assertion is that, in the economic and financial crisis, the interbank market fell victim to market failure, denying solvent credit institutions the ability to obtain funding. A recent analysis of the German interbank market now calls this narrative into question.

World trade suffered a marked decline during the financial and economic crisis which started in 2008, even more so than global economic output. A new study investigates what factors can explain the changes in world trade since 2000.

Covered bonds have a long history as a safe financial instrument and are still today a cornerstone of bank funding in Europe. But what underpins their success and how might new regulatory initiatives influence covered bond markets? A new study provides a theoretical model of covered bonds and identifies potential drawbacks of the instrument.