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on Central Banking |
| By: | International Monetary Fund |
| Abstract: | The paper briefs the Executive Board on the further considerations on CBDC. These cover the positioning of CBDC in the payments landscape, cyber resilience of the CBDC ecosystem, CBDC adoption, CBDC data use and privacy protection, implications for monetary policy operations, and cross-border payments with retail CBDC. |
| Keywords: | Capacity development; CBDC; Central bank digital currencies; Adoption; Collaboration; Cross-border payments; Cyber resilience; Data use and privacy protection; Monetary operations; Payment systems; Positioning CBDC; CBDC data; CBDC system; CBDC adoption; CBDC design; data use; position CBDC vis-à-vis; Digital financial services; Monetary base; Global |
| Date: | 2024–11–08 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfpps:2024/052 |
| By: | Alicia Aguilar (BANCO DE ESPAÑA) |
| Abstract: | This paper provides a novel and high-frequency index of sovereign fragmentation in the euro area. The proposed methodology offers a decomposition of sovereign yields into the common trend, market conditions, and fundamentals-based divergence, which are uncorrelated to fragmentation. Therefore, the fragmentation index constitutes a bottom-line indicator for euro area central banks, as it measures disorderly market dynamics in sovereign markets not warranted by fundamentals. In that sense, this paper provides relevant conclusions about the effectiveness of monetary policy interventions, pointing to the significant effect of market stabilisation announcements, such as the Transmission Protection Instrument (TPI), in reducing sovereign fragmentation. I contribute to the literature by estimating the uncorrelated drivers of euro area yields divergence using a restricted principal components analysis. The estimated factors are then used to assess the effect of fragmentation, market conditions and fundamentals on country yields through several economic regimes, pointing to differences across countries and over time. |
| Keywords: | principal components, monetary policy, quantitative easing, sovereign debt, financial crises, sovereign bond rates |
| JEL: | C38 E52 E58 H63 G01 G12 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:bde:wpaper:2520 |
| By: | International Monetary Fund |
| Abstract: | The expansion of central bank balance sheets has become a critical topic in the wake of the Global Financial Crisis and the COVID-19 pandemic. Central banks have taken unprecedented measures to ensure price stability and financial stability, particularly when traditional policy tools were insufficient. However, this expansion has led to significant balance sheet risks, resulting in notable losses as central banks have adjusted their policies in response to rising inflation. This guidance note explores these risks and introduces a modeling framework to assess them. While essential for achieving stability, the expansion of central bank balance sheets introduces significant risks that require careful management. The proposed modeling framework is a valuable tool for assessing these risks and guiding capital policy. Exploring the relationship between balance sheet size and economic outcomes could yield beneficial insights for future central bank strategies. |
| Keywords: | Central bank; balance sheet; stress testing; balance sheet risk; central bank equity; forecasting balance sheet; central bank bank transfer; balance sheet action; central bank profit; Financial statements; Central bank policy rate; Central bank balance sheet; Yield curve; International reserves; Global |
| Date: | 2024–12–23 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfpps:2024/067 |
| By: | Santiago Camara; Lawrence J. Christiano; Husnu Dalgic |
| Abstract: | We investigate the global transmission of US monetary policy shocks. The existing literature finds that a US monetary contraction causes a contraction in economic activity not only in the US but also abroad. This sharply contradicts the traditional Mundell-Fleming view. Much of the existing literature refers to frictions in international financial markets as reasons for the failure of the traditional view. Instead, we argue that trade is key for understanding the transmission of US monetary policy shocks. |
| Keywords: | Monetary policy spillovers, Trade channel, Small open economy DSGE models, Exchange rates. |
| JEL: | E44 E52 F31 F32 F41 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_782 |
| By: | Dennis Bonam; Dorinth van Dijk; Gavin Goy; Bing Zhu |
| Abstract: | We provide new evidence on the international spillover effects of US monetary policy through global commercial real estate (CRE) markets. Using a global VAR-X model that exploits both city- and country-level data, we account for spatial dependencies arising from cross-border investor ownership of CRE. A US quantitative easing shock leads to a persistent rise in CRE prices, both within and outside the US, and an expansion of credit, but mostly in the US. To interpret these findings, we develop an open economy New Keynesian model with CRE markets, which highlights the role of increased domestic demand for foreign CRE as a key transmission channel. Moreover, the model reveals that spillover effects can spill back to the US via trade linkages, amplifying the initial effects of US monetary policy. |
| Keywords: | monetary policy; commercial real estate; international spillovers; quantitative easing; global VAR-X model; New Keynesian model; |
| JEL: | C32 E32 E52 F42 R33 |
| URL: | https://d.repec.org/n?u=RePEc:dnb:dnbwpp:872 |
| By: | Thomas Drechsel; Daniel Lewis; Davide Melcangi; Laura Pilossoph |
| Abstract: | To study monetary policy transmission at the firm level, researchers typically consider heterogeneity along a small number of firm characteristics, such as size or leverage. We instead estimate the full distribution of firms’ investment responses to monetary policy, using a clustering regression framework. Our novel approach captures multidimensional and unobservable heterogeneity across firms and time. We find that investment by most firms in most time periods responds little to monetary policy. Only about 5% of firm-time observations are associated with a strong response. We then investigate the sources of heterogeneity ex post. We find that most of the variation in investment sensitivity arises within firms over time. Although several firm characteristics predict responsiveness to monetary policy, the majority of heterogeneity remains unexplained by firm observables. We demonstrate that our empirical estimates provide new targets for disciplining structural models of firm heterogeneity. |
| JEL: | D25 E22 E32 E52 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35867 |
| By: | Romain Meuwissen; Martin Rohár |
| Keywords: | Stablecoins, flow of funds, financial intermediation, financial stability, financial regulation, monetary architecture, dollarisation, international role of the euro, bank funding, digital money |
| JEL: | E42 E44 G28 O33 |
| Date: | 2026–10–05 |
| URL: | https://d.repec.org/n?u=RePEc:stm:wpaper:79 |
| By: | Bologna, Pierluigi; van Hengel, Marco; D’Andrea, Angelo; Busurelo, Lucija; Gawart, Karolina; Grecu, Robert; Lagaria, Katerina; Liebeg, David; Lima, Diana; Löhe, Sebastian; Palicz, Alexandr; Reginster, Alexandre; Coelho, Pedro Sousa; Tumino, Marcello; Uzum, Leonard; Vauhkonen, Jukka; Vignat, Paul; Naser, Safwan |
| Abstract: | After the global financial crisis, all EU countries have developed within their jurisdictions a dedicated macroprudential pillar of financial oversight, in line with EU regulations and recommendations. However, governance structures differ, reflecting country-specific rationales and path-dependent choices. This paper provides an overview of the various institutional and operational frameworks for macroprudential policy in EU countries. This overview aims to deliver insights on the key aspects of these frameworks and their impact on the use of macroprudential policy. The analysis is based on i) a literature review, ii) a stocktaking exercise based on a survey among EU Member States and iii) country deep dives. JEL Classification: G18, G28 |
| Keywords: | financial stability, governance, institutional framework, macroprudential policy |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbops:2026400 |
| By: | Couaillier, Cyril; Faber, Finn; Rodriguez d’Acri, Costanza; Shaw, Frances; Passinhas, Joana |
| Abstract: | We introduce two indicators to track the build-up of vulnerabilities in the euro area banking sector on a quarterly basis by leveraging the information collected in EU-wide solvency stress tests. First, we introduce an indicator of conditional capital depletion, the Stress Vulnerability Index (SVI), which quantifies potential losses under adverse scenarios when tail credit risk is highest. Second, we introduce an indicator of earnings vulnerability, the Profitability Vulnerability Index (PVI), which assesses the capacity of the banking sector to generate capital organically. While the two indices spike synchronously during systemic crises, they can also decouple. We show that this occurs when tail risks to capital subside but earnings remain compressed, or conversely, when recessionary fears mount while current profitability strengthens. These divergences provide actionable signals for macroprudential policy by distinguishing between the accumulation of solvency risks and the impairment of loss absorption capacity. In doing so, the indices support decisions on the activation, build-up, stability or release of prudential buffers. We validate the usefulness of the indicators by showing that both indicators were strongly associated with the probability that euro area banks received state aid in the aftermath of the Great Financial Crisis. JEL Classification: E61, G01, G21, G28 |
| Keywords: | bank capital, financial stability, stress test |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263295 |
| By: | Olivier J. Blanchard; Pedro Martínez-Bruera; Gonzalo Huertas |
| Abstract: | We characterize the size of the range of multiple equilibria in sovereign debt markets. We show that the nature of the equilibrium depends crucially on the degree of uncertainty, which we formalize first as uncertainty about primary balances and later as uncertainty about the fiscal feedback rule. For low uncertainty, the range can be large, but it becomes smaller as uncertainty becomes larger. If uncertainty is large enough, the multiplicity disappears: the interest rate is unique and becomes a continuous function of the debt level. The source of these results is that larger uncertainty decreases the effect of the perceived probability of default on the actual probability of default, thus reducing and eventually eliminating the scope for multiplicity. Interpreting the source of an increase in the interest rate in actual situations is difficult, and complicates the use of intervention by central banks. |
| JEL: | H6 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35850 |
| By: | Bahaj, Saleem; Reis, Ricardo |
| Abstract: | By controlling the scarcity of an offshore parallel currency, policymakers can manage capital flows and steer the exchange rate. This is an alternative policy to setting the rate of a Tobin tax. However, its fiscal implications are distinct, and this paper lays them out. Having a parallel currency creates both seigniorage and liquidity revenues. The two revenues have different sizes and different Laffer curves, both of which vary with the regime for the exchange rate, with liquidity policies, and with the size of the offshore market. Quantitatively, the fiscal footprint of offshore money management is small and the Laffer curve is flat, boosting the chances that it can be used independently of fiscal pressures. |
| Keywords: | integrated policy framework;CNH;financial transaction taxes;fiscal-monetary interactions |
| JEL: | F31 F33 E51 |
| Date: | 2026–09–30 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:141134 |
| By: | Eric Vansteenberghe |
| Abstract: | Two coefficients enter nearly every quantitative argument about monetary policy: the Phillips-curve slope and the policy rule's response to inflation. For seventy years, each generation that estimated them identified the coefficient conditional on assumptions it maintained, and its successor relaxed one of them, naming the bias this exposed. This survey reconstructs the two programs as a single identification problem. It distinguishes five senses in which a coefficient has been called identified, reads each generation of the curve and of the rule in that key, and shows that the programs fail together because each borrows its identifying condition from the other. The same sequence ran on the latent inflation target and on the optimal rule. The survey closes on what the credible designs license when they leave a range rather than a point: bounds, signs and orderings, and decisions designed for a range. |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2610.06007 |