This Paper proposes a new framework to analyse systematic and unsystematic monetary policy within the same econometric model. As in Bernanke and Boivin, 2001, the model aims at capturing the following facts: monetary authorities use information from a large number of data series to extract a...

Understanding the features and the determinants of individual price setting behaviour is important for the formulation of monetary policy. These behavioural mechanisms play a fundamental role in influencing the characteristics of aggregate inflation and in determining how monetary policy affects...

This paper investigates why the slope of the yield curve predicts future economic activity in Germany and the United States. A structural VAR is used to identify aggregate supply, aggregate demand, monetary policy and inflation scare shocks and to analyse their effects on the real, nominal and...

This paper evaluates models that exploit timely monthly releases to compute early estimates of current quarter GDP (now-casting) in the euro area. We compare traditional methods used at institutions with a new method proposed by Giannone, Reichlin and Small, 2005. The method consists in bridging...

This paper formalizes the process of updating the nowcast and forecast on output and inflation as new releases of data become available. The marginal contribution of a particular release for the value of the signal and its precision is evaluated by computing 'news' on the basis of an evolving...

We analyse the panel of the Greenbook forecasts (sample 1970-96) and a large panel of monthly variables for the US (sample 1970-2003) and show that the bulk of dynamics of both the variables and their forecasts is explained by two shocks. Moreover, a two factor model which exploits, in real...

In this paper we compare the effects of monetary policy on output and prices in the G-7 countries using a parsimonious macroeconometric model comprising output, prices and a short-term interest rate. We identify monetary policy shocks by assuming that they do not affect real output...

The work presented in this paper falls into two parts. First, using a simple model and within the context of the central bank’s objective of price stability, it is shown that the optimal monetary response to unexpected changes in asset prices depends on how these changes affect the central...

This paper introduces a new indicator of core inflation for New Zealand, estimated using a dynamic factor model and disaggregate consumer price data. Using disaggregate consumer price data we can directly compare the predictive performance of our core indicator with a wide range of other ‘core...

In monetary policy strategies geared towards maintaining price stability, conditional and unconditional forecasts of inflation and output play an important role. In this Paper we illustrate how modern sticky-price dynamic stochastic general equilibrium (DSGE) models, estimated using Bayesian...