The objective of this paper is to examine the main features of optimal monetary policy cooperation within a micro-founded macroeconometric frame-work. First, using Bayesian techniques, we estimate a two-country dynamic stochastic general equilibrium (DSGE) model for the United States (US) and...

We use a version of the New Area-Wide Model (NAWM) developed at the ECB in order to quantify the gains from monetary policy cooperation. The model is calibrated in order to match a set of empirical moments. We then derive the cooperative and (open-loop) Nash monetary policies, assuming that the...

This paper compares the Calvo model with a Taylor contracting model in the context of the Smets-Wouters (2003) Dynamic Stochastic General Equilibrium (DSGE) model. In the Taylor price setting model, we introduce firm-specific production factors and discuss how this assumption can help to reduce...

The paper provides new tools for the evaluation of DSGE models, and applies it to a large-scale New Keynesian dynamic stochastic general equilibrium (DSGE) model with price and wage stickiness and capital accumulation. Specifically, we approximate the DSGE model by a vector autoregression (VAR),...

This paper assesses the forecasting performance of various variable reduction and variable selection methods. A small and a large set of wisely chosen variables are used in forecasting the industrial production growth for four Euro Area economies. The results indicate that the Automatic Leading...

This paper assesses the forecasting performance of various variable reduction and variable selection methods. A small and a large set of wisely chosen variables are used in forecasting the industrial production growth for four Euro Area economies. The results indicate that the Automatic Leading...

Testing and estimating the rank of a matrix of estimated parameters is key in a large variety of econometric modelling scenarios. This paper describes general methods to test for and estimate the rank of a matrix, and provides details on a variety of modelling scenarios in the econometrics...

Standard measures of prices are often contaminated by transitory shocks. This has prompted economists to suggest the use of measures of underlying in?ation to formulate monetary policy and assist in forecasting observed in?ation. Recent work has concentrated on modelling large datasets using...

This paper compares the Calvo model with a Taylor contracting model in the context of the Smets-Wouters (2003) Dynamic Stochastic General Equilibrium (DSGE) model. In the Taylor price setting model, we introduce firm-specific production factors and discuss how this assumption can help to reduce...