In the framework of a new money market econometric model, we assess the degree of precision achieved by the European Central Bank ECB) in meeting its operational target for the short-term interest rate and the impact of the U.S. sub-prime credit crisis on the euro money market during the second...

In the paper we propose a new methodological approach to core inflation estimation, based on a frequency domain principal components estimator, suited to estimate systems of fractionally cointegrated processes. The proposed core inflation measure is the scaled common persistent factor in...

We provide a methodology to disentangle the long-run relation between variables from their own dynamics. Macroeconomic and aggregate financial series have a high degree of inertia. If this persistence is not properly accounted for, spurious correlations will give rise to paradoxes. Our procedure...

In this paper we study the zero frequency spectral properties of fractionally cointegrated long memory processes and introduce a new frequency domain principal components estimator of the cointegration space and the factor loading matrix for the long memory factors. We find that for fractionally...

This paper develops a new econometric framework to model duration, volume and volatility simultaneously. We obtain an econometric reduced form that incorporates causal and feedback effects among these variables. We construct impulse-response functions that show how the system reacts to a...

Conditional heteroskedasticity is an important feature of many macroeconomic and financial time series. Standard residual-based bootstrap procedures for dynamic regression models treat the regression eroor as i.i.d. These procedures are invalid in the presence of conditional heteroskedasticity....

A prediction model is any statement of a probability distribution for an outcome not yet observed. This study considers the properties of weighted linear combinations of n prediction models, or linear pools, evaluated using the conventional log predictive scoring rule. The log score is a concave...

The paper analyses the trade-off between exchange rate flexibility and monetary policy autonomy. It tests empirically the 'Possible Duality' hypothesis, i.e. whether countries with more flexible currency regimes are indeed able to exert more monetary policy autonomy than those with less flexible...

This paper focuses on changes in the currency options market’s assessment of likely future exchange rate developments around the times of official interventions in the JPY/USD exchange rate. We estimate the options-implied risk-neutral density functions (RNDs) using daily OTC quotes for...