Traditional theory suggests that high franchise value limits bank risk-taking incentives. Then why did many banks with exceptionally valuable franchises get exposed to new financial instruments, resulting in significant losses during the crisis? This paper attempts to reconcile theory and...

We provide new insights on the formation of inflation expectations - in particular at a time of great financial and economic turmoil - by evaluating results from a survey conducted from July 2009 through July 2010. Participants in this survey answered a weekly questionnaire about their short-,...

Traditional unobserved component models assume that the trend, cycle and seasonal components of an individual time series evolve separately over time. Although this assumption has been relaxed in recent papers that focus on trend-cycle interactions, it remains at the core of all seasonal...

This paper investigates the ability of the adaptive learning approach to replicate the expectations of professional forecasters. For a range of macroeconomic and financial variables, we compare constant and decreasing gain learning models to simple, yet powerful benchmark models. We find that...

We derive optimal weights for Markov switching models by weighting observations such that forecasts are optimal in the MSFE sense. We provide analytic expressions of the weights conditional on the Markov states and conditional on state probabilities. This allows us to study the effect of...

We construct a new-Keynesian DSGE model tailored to the Netherlands and interpret it as a multivariate unobserved components model. We identify three major stochastic trends in the data—trends in general-purpose technology, investment-specific technology, and labor supply—and model them...

We empirically investigate how well different learning rules manage to explain the formation of household inflation expectations in six key member countries of the euro area. Our findings reveal a pronounced heterogeneity in the learning rules employed on the country level. While the expectation...

In this study we construct a business cycle indicator for the Netherlands. The Christiano-Fitzgerald band-pass .lter is employed to isolate the cycle using the de.nition of business cycle frequencies as waves with lengths longer than 3 years and shorter than 11 years. The main advantage of...

This paper assesses the performance of core inflation measures based on the structural VAR approach. Since core or monetary inflation is not directly observable, we develop a monetary general equilibrium model that fits real aggregated European data and use this model to generate time series for...

In this paper the business cycles of nine OECD-countries are identified by applying the Christiano-Fitzgerald bandpass filter. Turning points, recession and expansion phases and other descriptive statistics are derived from these business cylce indicators. Moreover, the international linkage...