Rational expectations has been the dominant way to model expectations, but the literature has quickly moved to a more realistic assumption of boundedly rational learning where agents are assumed to use only a limited set of information to form their expectations. A standard assumption is that...

The model presented here is an estimated medium-scale New Multi-Country Model (NMCM) which covers the five largest euro area countries and is used for forecasting and scenario analysis at the European Central Bank. The model has a tight theoretical structure which allows for non-unitary...

We build a model of the euro area incorporating financial market frictions at the level of firms and households. Entrepreneurs borrow from financial intermediaries in order to purchase business capital, in the spirit of the “financial accelerator” literature. We also introduce two types of...