This paper explores whether the cost channel solves the price puzzle. We set-up a New Keynesian DSGE model and estimate it for the euro area by adopting a minimum distance approach. Our findings suggest that - under certain parameter restrictions which are not rejected by the data - the cost...

This paper estimates forward-looking Taylor rules for the euro area. Using the asymmetries in inflation and cyclical output developments across countries, we investigate the adequacy of the single monetary policy for each of the European Monetary Union (EMU) member countries. Notable differences...

This paper proposes a new method of forecasting euro area quarterly real GDP that uses area-wide indicators, which are derived by optimally pooling the information contained in national indicator series. Following the ideas of predictive modeling, we construct the area-wide indicators by...

For reasons of analytical tractability, new economic geography (NEG) models treat geography in a very simple way: attention is either confined to a simple 2-region or to an equidistant multi-region world. As a result, the main predictions regarding the impact of e.g. diminishing trade costs are...

This paper studies the causes of price dispersion in the euro area emerging in response to a shock that hits all member countries symmetrically. We use a panel VAR model which is estimated over the period 1996 - 2007 to generate impulse responses of a range of price and wage variables to an oil...

This paper explores the importance of housing and mortgage market heterogeneity in 12 European countries for the transmission of monetary policy. We use a panel VAR model which is estimated over the period 1995-2006 to generate impulse responses of key macroeconomic variables to a monetary...

Distance related variables typically vary in a cross-section dimension but less so in a time dimension across cities, regions, or countries. The enlargement of the EU or the introduction of the euro, however, can be looked upon as integration shocks that are informative of the consequences of...

In explaining the uneven spatial distribution of economic activity, urban economics and new economic geography (NEG) dominate recent research in economics. A main difference between these two approaches is that NEG stresses the role of spatial linkages whereas urban economics does not do so. We...

This paper presents a stress indicator for the Euro-zone that summarizes developments of trends and cycles in real GDP and inflation in the member countries. Stress in a country is defined as the difference between the country's actual short-term interest rate and the interest rate that would...

Based on a new economic geography (NEG) model by Puga (1999), we use the equilibrium wage equation to estimate two key structural model parameters for the NUTS II EU regions. These estimations enable us to come up with an empirically grounded free-ness of trade parameter. In line with NEG...