infonet-economy

Empirical research suggests that lower interest rates induce banks to take higher risks. We assess analytically what this risk-taking channel implies for optimal monetary policy in a tractable New Keynesian model. We show that this channel creates a motive for the planner to stabilize the real rate. This objective conflicts with the standard inflation stabilization objective. Optimal...

Bolli, Thomas; Caves, Katherine M.; Pusterla, Filippo; Rageth, Ladina; Renold, Ursula; Sritharan, Aranya; Trachsel Díaz-Tejeiro, Sandra

This paper empirically examines the effect of population growth on long-term real interest rates. Although this effect is well founded in macroeconomic theory, the corresponding empirical results have been rather tenuous and surprisingly unstable. As the demographic interest rate impact is theoretically based on intergenerational relationships, we not only contemplate gross...

Cleres, David; Rassouli, Frank; Brutsche, Martin; Kowatsch, Tobias; Barata, Filipe

Financial markets reacted with a vengeance to the COVID-19 pandemic. We argue that while the spread of the pandemic is statistically significant in explaining changes to bond spreads, it has little additional explanatory power over variables that capture financial stress. Financial markets reacted as in any international financial crisis by penalizing emerging economies exposing...

Global value chains (GVCs) have revolutionized production processes and many companies no longer produce goods and services entirely in one single country or within their own organizational boundaries. Through off- shoring and outsourcing, value chains are sliced up and activities are dispersed to locations and actors where they can be produced or executed most efficiently. The fine...

Bolli, Thomas; Caves, Katherine M.; Pusterla, Filippo; Rageth, Ladina; Renold, Ursula; Sritharan, Aranya; Trachsel Díaz-Tejeiro, Sandra

Banholzer, Nicolas; Feuerriegel, Stefan; Fleisch, Elgar; Bauer, Georg F.; Kowatsch, Tobias

Mavrodiev, Pavlin; Schweitzer, Frank