In a highly interlinked global economy a key question for policy makers is how foreign shocks and policies transmit to the domestic economy. We develop a semi-structural multi-country model with rich real and financial channels of international shock propagation for the euro area, the US, Japan,...

Periods of economic and financial stress traditionally give rise to profound changes in economic theory and in the way policy decisions are taken. Motivated by the recent interest in renewing macroeconomics after the global financial crisis, we collected the views of senior central bank staff in...

Using two estimated models for the euro area and the United States, this paper investigates whether the observed difference in the amplitude of the interest rate cycle since 1999 in both areas is due to differences in the estimated monetary policy reaction function, differences in the structure...

Whereas the bulk of the literature on DSGE models provides a rationale for inflation targeting strategies, there is no model doing such a job for the strategy implemented for almost ten years now by the Eurosystem and known as the "two-pillar monetary policy strategy". We try to address this...

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...

Rational expectations has been the dominant way to model expectations, but the literature has quickly moved to a more realistic assumption of boundedly rational learning where agents are assumed to use only a limited set of information to form their expectations. A standard assumption is that...

The model presented here is a New estimated medium-scale Multi-Country Model (NMCM) which covers the five largest euro area countries and is used for forecasting and scenarios analysis at the European Central Bank. The model has a tight theoretical structure which allows for non-unitary...

A large share of global trade being priced and invoiced primarily in US dollar rather than the exporter’s or the importer’s currency has important implications for the transmission of shocks. We introduce this “dominant currency pricing” (DCP) into ECB-Global, the ECB’s macroeconomic...

This paper documents the structure, estimation and simulation properties of the Italian block of the ESCB-multi-country model (MCM). The model is used regularly as an input into Eurosystem projection exercises and, to a lesser extent, in simulation analysis. The specification of the Italian...

The paper presents the German block of the ESCB multi-country model. It builds on previous modelling work on the Area Wide Model and other country blocks of the ESCB multicountry-model. Whilst being analogous to these models in following a common modelling approach and the same theoretical...