We estimate the elasticity of substitution of a country's imports, and that of its exports on the world market, for EU countries using sector level trade data. We present a new empirical strategy based on the identification scheme by Feenstra (1994), which enables the estimation of elasticities...

This paper studies the determinants of the euro exchange rate during the European sovereign debt crisis, allowing a role for macroeconomic fundamentals, policy actions and the public debate by policy makers. It finds that the euro exchange rate mainly danced to its own tune, with a particularly...

We propose a model for analyzing euro area trade based on the interaction between macroeconomic and trade variables. First, we show that macroeconomic variables are necessary to generate accurate short-term trade forecasts; this result can be explained by the high correlation between trade and...

We explain the role of the Phillips Curve in the analysis of the economic outlook and the formulation of monetary policy at the ECB. First, revisiting the structural Phillips Curve, we highlight the challenges in recovering structural parameters from reduced-form estimates and relate the...

Price inflation in the euro area has been stable and low since the Global Financial Crisis, despite notable changes in output and unemployment. We show that an increasing share of high markup firms is part of the explanation of why inflation remained stubbornly stable and low in the euro area...

What drives external performance of countries? This is a recurring question in academia and policy. The factors underlying export growth are receiving great attention, as countries struggle to grow out of the crisis by increasing exports and as protectionist discourses take foot again. Despite...

We estimate the response of product-level retail prices to changes in the corporate tax rates paid by wholesale producers (pass-through). Under perfect competition in goods and factor markets, pass-through of corporate taxes should be zero, and their incidence mainly falls on factor prices. We...

We study exchange rate pass-through (ERPT), i.e., the impact of exchange rate movements on inflation, focusing on euro area import prices at a sectorally disaggregated level. Our estimation strategy is based on VAR-X models, thus incorporating both endogenous and exogenous explanatory...

We apply the Campbell-Shiller return decomposition to exchange rate returns and fundamentals in a stationary panel vector autoregression framework. The return decomposition is then used to analyse how different investor segments react to news as captured by the different return components. The...