This paper investigates the optimal monetary policy response to a shock to collateral when policymakers act under discretion and face model uncertainty. The analysis is based on a New Keynesian model where banks supply loans to transaction constrained consumers. Our results confirm the...

The current crisis and discussions, in the euro area in particular, show that sovereign debt crises/defaults are no longer restricted to developing economies. After crises in many Latin American countries, the literature on quantitative dynamic macro-models of sovereign default has been...

This paper documents the opaqueness of central banks about the economic models they use to choose policy but argues that this is largely due to the lack of consensus about the correct model of the economy within the economic profession. The latter is illustrated by contrasting three currently...

This study provides a rigorous empirical comparison of structural and reduced-form credit risk frameworks. As major difference we focus on the discriminative modeling of default time. In contrast to previous literature, we calibrate both approaches to bond and equity prices. By using same input...

Results from portfolio models for credit risk tell us that loan concentration in certain industry sectors can substantially increase the value-at-risk (VaR). The purpose of this paper is to analyze whether a tractable infection modelʺ can provide a meaningful estimate of the impact of...

The coordination channel has been proposed as a means by which foreign exchange market intervention may be effective, in addition to the traditional portfolio balance and signaling channels. If strong and persistent misalignments of the exchange rate are caused by non-fundamental influences,...

We report results on the ex ante predictability of monthly excess stock returns in Germany using real-time and revised macroeconomic data. Our real-time macroeconomic data cover the period 1994-2005. We report three results. 1) Real-time macroeconomic data did not contribute much to ex ante...

We focus on a quantitative assessment of rigid labor markets in an environment of stable monetary policy. We ask how wages and labor market shocks feed into the inflation process and derive monetary policy implications. Towards that aim, we structurally model matching frictions and rigid wages...

The stochastic frontier analysis (Aigner et al., 1977, Meeusen and van de Broeck, 1977) is widely used to estimate individual efficiency scores. The basic idea lies in the introduction of an additive error term consisting of a noise and an inefficiency term. Most often the assumption of a...

This paper discusses pooling versus model selection for now- and forecasting in the presence of model uncertainty with large, unbalanced datasets. Empirically, unbalanced data is pervasive in economics and typically due to different sampling frequencies and publication delays. Two model classes...