In this paper we present an overview of theoretical and empirical contributions exploring the inter-linkages between financial factors and real economic activity. We first revisit the main theoretical approaches that allow financial frictions to be embedded into general equilibrium models, and...

In this paper we study the effect of contemporaneous aggregation of heterogeneous GARCH processes as the cross-sectional size diverges to infinity. A complete statistical characterization of the limit aggregate is provided under general assumptions on the form and degree of heterogeneity of the...

Business investment is a very important variable for short- and medium-term economic analysis, but it is volatile and difficult to predict. Qualitative business survey data are widely used to provide indicators of economic activity ahead of the publication of official data. Traditional...

This paper proposes the use of Bayesian model averaging (BMA) as a tool to select the predictors' set for bridge models. BMA is a computationally feasible method that allows us to explore the model space even in the presence of a large set of candidate predictors. We test the performance of BMA...

This paper documents the existence of a significant forecast error on crude oil futures, particularly evident since the mid-1990s, which is negative on average and displays a non-trivial cyclical component (risk premium). We show that the forecast error on oil futures could have been explained...

The process through which economic policy is conceived and decided cannot be simply described as the optimisation of a well-defined loss function subject to the constraints provided by a model of the economy. Even ignoring the forbidding difficulties of eliciting a stable and explicit loss...