We study the transmission of monetary shocks across euro-area countries using a dynamic factor model and high-frequency identification. We develop a methodology to assess the degree of heterogeneity, which we find to be low in financial variables and output, but significant in consumption,...

We build an arbitrage-based model of the yield curves in a heterogeneous monetary union with sovereign default risk, which can account for the asymmetric shifts in euro area yields during the Covid-19 pandemic. We derive an affine term structure solution and decompose yields into term premium...

The success of European Economic and Monetary Union (EMU) will depend on the stability of the euro. The monetary policy framework is yet to be decided, but is likely to involve either money or inflation targeting. Stochastic simulations compare the outcomes for major macroeconomic and financial...