Structural VAR studies disagree with narrative accounts about the history of monetary policy disturbances. We investigate whether employing the narrative monetary shock account as a proxy variable in a VAR model aligns both shock series. We quantify the extent to which the disagreement still...

In recent macroeconomic theory, relative price variability (RPV) generates the central distortions of inflation. This paper provides first evidence on the empirical relation between inflation and RPV in the euro area focusing on threshold effects of inflation. We find that expected inflation...

The recent global financial crisis has increased interest in macroeconomic models that incorporate financial linkages. Here, we compare the simulation properties of five mediumsized general equilibrium models used in Eurosystem central banks which incorporate such linkages. The financial...

The paper derives the monetary policy reaction function implied by money growth targeting. It consists of an interest rate response to deviations of the inflation rate from target, to the change in the output gap, to money demand shocks and to the lagged interest rate. In the second part, it is...

This paper investigates how the dynamic adjustment of the European overnight rate Eonia to the term spread and the ECB's policy rate has been affected by rate expectations and the operational framework of the ECB. In line with recent evidence found for the US and Japan, the reaction of the Eonia...

Papers estimating the reaction function of the Bundesbank generally find that its monetary policy from the 1970s to 1998 can well be captured by a standard Taylor rule according to which the central bank responds to the output gap and to deviations of inflation from target, but not to monetary...

The paper analyses the performance of simple interest rate rules which feature a response to noisy observations of inflation, output and money growth. The analysis is based on a small empirical model of the hybrid New Keynesian type which has been estimated on euro area data by Stracca (2007)....

The recent global financial crisis has increased interest in macroeconomic models that incorporate financial linkages. Here, we compare the simulation properties of five mediumsized general equilibrium models used in Eurosystem central banks which incorporate such linkages. The financial...

The Eurosystem's main refinancing operations (MRO) are key for the interbank money market and the monetary transmission process in the euro area. This paper investigates how money market rates respond to the information revealed by various aspects of an MRO auction outcome. Our results confirm...