Ulrike Neyer

Interest on Reserves and the Flexibility of Monetary Policy in the Euro Area

This paper shows that remunerating required reserves can increase the flexibility of monetary policy. The remuneration at the current policy rate implies constant net marginal interest costs of holding required reserves. This allows the central bank to change the policy rate also within a reserve maintenance period without inducing a problematic reserve shifting on behalf of the banks. In the euro area, required reserves are remunerated at an average rate. Therefore, the way in which reserves are remunerated has to be changed in order to make use of the advantage of a higher flexibility of monetary policy.

Are Rating Splits a Useful Indicator for the Opacity of an Industry

In empirical analyses, rating splits (disagreement between rating agencies) are commonly used as a proxy for the opacity of an industry. This is justified by the argument that a higher number of rating splits should be observed if a sector is more opaque. In this paper we challenge this view. We show that rating splits may occur if an industry is rather opaque but that they may also occur if an industry is rather transparent. Therefore, rating splits are not a useful indicator for opacity.

Asymmetric Information and the Transmission Mechanism of Monetary Policy

Abstract This paper analyses the consequences of asymmetric information in credit markets for the monetary transmission mechanism. It shows that asymmetric information can not only reinforce but can also weaken or overcompensate the effects of the standard interest rate channel. Crucial is that informational problems lead to an external finance premium that can be positive or negative for marginal entrepreneurs. Tight money may lead to an increase in the absolute value of this premium, implying that there is a credit channel of monetary policy, but its working direction is ambiguous.