We log-linearise the Dellas and Tavlas (DT) model of monetary union and solve it analytically. We find that the intuition of optimal currency analysis of DT's second generation open economy model is essentially the same as that of first generation models. Monetary union results in no welfare...

This paper provides real time evidence on the usefulness of the euro area output gap as a leading indicator for inflation and growth. A genuine real-time data set for the euro area is used, including vintages of several alternative gap estimates. It turns out that, despite some difference across...

This paper provides evidence on the reliability of euro area real-time output gap estimates, including those provided by the IMF, OECD and EC and a set of model based measures. A genuine real-time data set is used, including vintages of several sets of euro area output gap estimates available...

In this paper we assess the possibility of producing unbiased forecasts for fiscal variables in the euro area by comparing a set of procedures that rely on different information sets and econometric techniques. In particular, we consider ARMA models, VARs, small scale semi-structural models at...

In this Paper we compare alternative approaches for dating the euro area business cycle and analysing its characteristics. First, we extend a commonly used dating procedure to allow for length, size and amplitude restrictions, and to compute the probability of a phase change. Second, we apply...

The Friedman rule states that steady-state welfare is maximized when there is deflation at the real rate of interest. Recent work by Khan et al. (2003) uses a richer model but still finds deflation optimal. In an otherwise standard new Keynesian model we show that, if households have hyperbolic...

Using indirect inference based on a VAR we confront US data from 1972 to 2007 with a standard New Keynesian model in which an optimal timeless policy is substituted for a Taylor rule. We find the model explains the data both for the Great Acceleration and the Great Moderation. The implication is...

We develop an estimated model of the US economy in which agents form expectations by continually updating their beliefs regarding the behaviour of the economy and monetary policy. We explore the effects of policy-makers' misperceptions of the natural rate of unemployment during the late 1960s...

This paper explores the influence of wage and price staggering on monetary persistence. We show that, for plausible parameter values, wage and price staggering are highly complementary in generating monetary persistence. We do so by proposing the new measure "quantitative persistence," after...

Nowadays a considerable amount of information on the behaviour of the economy is readily available, in the form of large datasets of macroeconomic variables. Central bankers can be expected to base their decisions on this very large information set. Yet the academic profession has shown a clear...