This paper estimates a monetary policy reaction function for the ECB over the period 1999-2009. To allow for a potential shift in interest rate setting during the financial crisis, we permit a smooth transition from one set of parameters to another. The estimates show a swift change in the...

We study ECB’s interest rate setting in 1999-2010 using a reaction function in which forecasts of future economic growth and inflation enter as regressors. Allowing for a gradual switch between two reaction functions, we detect a shift after Lehman Brothers failed in September 2008 when the...

Empirical fiscal policy reaction functions based on ex-post data cannot be said to describe fiscal policymakers intentions because they utilise data which did not exist when their decisions were made. A characterisation of what fiscal policy makers were trying to do requires real time data. This...

The effectiveness of cyclically adjusted balances (CABs) as an indicator of the health of public finances depends on the accuracy with which cyclically adjusted figures can be calculated in real time. This paper measures the accuracy of such figures using a specially constructed real time data...

Price and output level convergence between new member states and the existing EU necessarily implies inflation and growth divergence for many years to come. That complicates the conditions for accession to the euro. In this Paper, we focus on debt dynamics for the eight new member states from...

We demonstrate that average interest rates in the EMU countries in 1990-98, with the exception of the period of exchange market turmoil in 1992-93, moved very closely in relation to average output gaps and inflation as suggested by the Taylor rule.

Following Estrella and Hardouvelis (1991) and Estrella and Mishkin (1995a, b), we study the ability of the term structure to predict recessions in eight countries. The results are four-fold. First, the yield curve predicts future recessions in all countries. Second, term spreads forecast...

This paper studies the responses of residential property and equity prices, inflation and economic activity to monetary policy shocks in 17 countries, using data spanning 1986-2006. We estimate VARs for individual economies and panel VARs in which we distinguish between groups of countries on...

The Kydland-Prescott, Barro-Gordon inflation bias result relies on the presumption that policymakers aim at achieving a level of employment above potential. Both academics and policymakers have recently questioned this presumption on the ground of realism. We show that even if policymakers are...

While monetary targeting has become increasingly rare, many central banks attach weight to money growth in setting interest rates. This raises the issue of how money can be combined with other variables, in particular the output gap, when analysing inflation. The Swiss National Bank emphasises...