This paper uses a small, calibrated forward-looking model of the euro-area economy to investigate the implications of incomplete information about potential output for the conduct and the design of monetary policy. Three sets of issues are examined. First, the certainty-equivalent optimal policy...

This paper introduces a new loss function and Usefulness measure for evaluating early warning systems (EWSs) that incorporate policymakers' preferences between issuing false alarms and missing crises, as well as individual observations. The novelty derives from three enhancements: i) accounting...

The empirical literature on systemic banking crises (SBCs) has shown that SBCs are rare events that break out in the midst of credit intensive booms and bring about particularly deep and long-lasting recessions. We attempt to explain these phenomena within a dynamic general equilibrium model...

The paper develops an early-warning model for predicting vulnerabilities leading to distress in European banks using both bank and country-level data. As outright bank failures have been rare in Europe, the paper introduces a novel dataset that complements bankruptcies and defaults with state...

We study market perception of sovereign credit risk in the euro area during the financial crisis. In our analysis we use a parsimonious CDS pricing model to estimate the probability of default (PD) and the loss given default (LGD) as perceived by financial markets. We find that separate...

In this paper we study the impact that financial reputation and official market interventions have on the timing and amount of debt issuance decisions by banks. To do so, we propose an extension of the two-part modelling framework of Cragg (1971, eq. 7 and 9) to accommodate random effects. We...

This paper investigates leading indicators of systemic banking crises in a panel of 11 EU countries, with a particular focus on Finland. We use quarterly data from 1980Q1 to 2013Q2, in order to create a large number of macro-financial indicators, as well as their various transformations. We make...

This paper discusses the role of risk communication in macroprudential oversight and of visualization in risk communication. Beyond the soar in data availability and precision, the transition from firm-centric to system-wide supervision imposes vast data needs. Moreover, in addition to internal...