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Discussion Paper
Central Banks and Digital Currencies
Recent developments in payments technology raise important questions about the role of central banks either in providing a digital currency themselves or in supporting the development of digital currencies by private actors, as some authors of this post have discussed in a recent IMF blog post. In this post, we consider two ways a central bank could choose to become involved with digital currencies and discuss some implications of these potential choices.
Report
Monetary policy and financial conditions: a cross-country study
Loose financial conditions forecast high output growth and low output volatility up to six quarters into the future, generating time-varying downside risk to the output gap, which we measure by GDP-at-Risk (GaR). This finding is robust across countries, conditioning variables, and time periods. We study the implications for monetary policy in a reduced-form New Keynesian model with financial intermediaries that are subject to a Value at Risk (VaR) constraint. Optimal monetary policy depends on the magnitude of downside risk to GDP, as it impacts the consumption-savings decision via the Euler ...