Q2. What are the future works in this paper?
In this paper the authors focus on the possibility of sunspot fluctuations that arise from self-fulfilling revisions to expectations.
Q3. How many deposits were held by non-financial corporations and households in the euro area?
Sight deposits, saving deposits and time deposits amounted to 38 percent, 31 percent and 31 percent of total deposits held by non-financial corporations and households in the euro area, respectively.
Q4. What are the stability properties associated with monetary policy rules?
In particular, monetary policy rules give rise to a determinate equilibrium if the implied response to inflation is sufficiently strong.
Q5. What is the main reason for the decline in the real interest rate?
if nominal rates do not adjust sufficiently, a rise in expected inflation leads to a decrease in the real interest rate, which stimulates aggregate demand.
Q6. how much is the pass-through to bank deposits in the euro area?
While the pass-through from money market rates to bank deposit rates is nearly complete in the U.S., it amounts on average to 0.32 in the euro area.
Q7. What is the average pass-through to interest rates in the U.S.?
Assuming that at least the long-run pass-through from policy rates to market rates is close to complete, the overall pass-through to interest rates more generally is likely to be higher than to retail rates.
Q8. How long does the pass-through range for savings deposits?
The long-run pass-through ranges between 0.27 for saving deposits with a maturity of less than three months and 0.66 for time deposits with a maturity of up to two years.
Q9. How is the passthrough to interest rates in the U.S.?
For the U.S., the long-run pass-through, λ, is nearly complete for most categories of deposit rates and on average approximately 0.57 for lending rates.
Q10. How do the authors test for unit roots in the retail and monetary policy rate series?
The authors start by testing for unit roots in their retail and monetary policy rate series, where the authors take the three-month money market rate as a proxy for the policy rate.
Q11. What is the reason why the pass-through to lending rates is smaller in the euro area?
If the limited pass-through to retail rates is indeed due to the formation of relationships and implicit contracts, it follows that market rates in general should follow policy rates more closely.
Q12. What is the time period the authors consider for the euro area?
The time period the authors consider starts in January 1995 and ends in September 2003, because no longer aggregated time series are available for the euro area.
Q13. How long does the passthrough range for shortterm loans to households?
There the long-run pass-through ranges between 0.43 for shortterm loans to households and 0.69 for business loans with a maturity of up to one year.
Q14. What is the upper bound on associated with determinacy?
the upper bound on κπ associated with determinacy appears to be extremely large for plausible parameterizations and is satisfied by empirically estimated interest rate rules.
Q15. What is the effect of 1/(1+) on the deposit rate?
1/(1+ψ) determines the immediate pass-through from the bond yield, which is assumed to be the interest rate targeted by monetary policy, and ψν/(1 + ψ) determines the persistence of the deposit rate.
Q16. What is the CES aggregate of the quantities of differentiated goods?
The composite consumption good, Ct, is a CES aggregate of the quantities ofdifferentiated goods, Ct(i), where i ∈ (0, 1): Ct = (∫ 1 0 Ct(i) −1 di ) −1 .
Q17. What is the lower bound for in the U.S.?
their empirical results suggest that κ̄π, the lower bound for κπ, consistent with a determinate equilibrium, lies between unity and 1.75 in the U.S.8
Q18. What is the average pass-through to interest rates in the euro area?
In the euro area, the average long-run pass-through appears to be lower than in the U.S. Consequently, larger values of κπ are needed for determinacy.
Q19. What does Ga et al. (2004) show about the Taylor principle?
Gaĺı et al. (2004) introduce rule-ofthumb consumers in a sticky-price model and show that the Taylor principle is no longer sufficient for determinacy.