This paper explores whether the cost channel solves the price puzzle. We set-up a New Keynesian DSGE model and estimate it for the euro area by adopting a minimum distance approach. Our findings suggest that - under certain parameter restrictions which are not rejected by the data - the cost...

In this paper, we examine the role of global and domestic credit supply shocks in macroeconomic fluctuations for Emerging Markets. For this purpose, we impose a set of zero and sign restrictions within a medium-scale Bayesian Vector Auto-Regressive model. Quarterly data from South Africa and G-7...

This brief exposition suggests that the Federal Reserve System temporarily guarantee a lower bound on stock prices in order to escape the current combination of liquidity trap and credit crunch. It shortly discusses reasons for this measure, consequences, and some alternatives. It is meant as a...

This study approaches the Quantity Theory of Money at a conceptual level, asking how it can be most reasonably interpreted and quantitatively assessed. The resulting approach is straightforward. Unlike studies relying on other methods we find evidence of its linchpin prediction that is not...

This paper estimates a time-varying AR-GARCH model of inflation producing measures of inflation uncertainty for the euro area, and investigates the linkages between them in a VAR framework, also allowing for the possible impact of the policy regime change associated with the start of EMU in...

DSGE-models have become important tools of analysis not only in academia but increasingly in the board rooms of central banks. The success of these models has much to do with the coherence of the intellectual framework it provides. The limitations of these models come from the fact that they...

This paper investigates the relationship between inflation and inflation uncertainty in twelve EMU countries. A time-varying GARCH model is estimated to distinguish between short-run and steady-state inflation uncertainty. The effects of the introduction of the Euro in 1999 are then examined...

The Generalized Calvo and the Generalized Taylor model of price and wage-setting are, unlike the standard Calvo and Taylor counter-parts, exactly consistent with the distribution of durations observed in the data. Using price and wage micro-data from a major euro-area economy (France), we...

This paper explores time variation in the dynamic effects of technology shocks on U.S. output, prices, interest rates as well as real and nominal wages. The results indicate considerable time variation in U.S. wage dynamics that can be linked to the monetary policy regime. Before and after the...

The ‘saving for a rainy day’ hypothesis implies that households’ saving decisions reflect that they can (rationally) predict future income declines. The empirical relevance of this hypothesis plays a key role in discussions of fiscal policy multipliers and it holds under the null that the...