This paper studies how U.S. monetary policy affects global stock prices. We find that global stock prices respond strongly to changes in U.S. interest rate policy, with stock prices increasing (decreasing) following unexpected monetary loosening (tightening). This impact is more pronounced for...

We propose a method for estimating a subset of the parameters of a structural rational expectations model by exploiting changes in policy. We define a class of models, midway between a vector autoregression and a structural model, that we call the recoverable structure. We provide an application...

Despite convergence pressures, differences in housing and financial market institutions across the 15 member states of the European Union are still enormous. This paper argues that they have profound effects on the responsiveness of output and inflation in the different countries to changes in...

We propose a classical approach to estimate factor-augmented vector autoregressive (FAVAR) models with time variation in the factor loadings, in the factor dynamics, and in the variance-covariance matrix of innovations. When the time-varying FAVAR is estimated using a large quarterly dataset of...

This paper evaluates VAR models designed to analyse the monetary policy transmission mechanism in the United States by considering three issues: specification, identification, and the effect of the omission of the long-term interest rate. Specification analysis suggests that only VAR models...

In this Paper we study the role of the exchange rate in conducting monetary policy in an economy with near-zero nominal interest rates as experienced in Japan since the mid-1990s. Our analysis is based on an estimated model of Japan, the United States and the euro area with rational expectations...

In response to the financial crisis of 2007-2010, many central banks are getting involved in macroprudential supervision. Central bank communication will constitute a central policy tool for that purpose. The paper asks how such communication will affect financial markets, exploiting the fact...

Sweden is home to a remarkably large number of prosperous multinationals. We argue that this is partly the result of industrial policies that have been biased in favour of large firms, and partly the result of an institutional setting where regulations and controls have facilitated investment...

We propose an index of the fiscal stance that is convenient for practical use. It is based on a finite time horizon, not on an infinite time horizon like most tests. As it employs VAR analysis it is simple to compute and easily automated. We also show how it is possible to analyse a change of...

There is a well-established methodology for measuring the effects of economic policy in a model that is `causal' or backward-looking. In this paper a complementary methodology is described for the case in which the model is `non-causal' or forward-looking. The methodology is then applied to an...