A two-country sticky-price model is used to analyse the interactions between fiscal and monetary policy. The role of an u0091activistu0092 fiscal policy as a stabilisation tool is considered and a measure of the welfare gains from international fiscal policy cooperation is derived. It is found...

This paper presents a toolkit1 for generating optimal policy projections. It makes five contributions. First, the toolkit requires a minimal set of inputs: only a baseline projection for target and instrument variables and impulse responses of those variables to policy shocks. Second, it solves...

We analyse the implications of asymmetric monetary policy rules by estimating Markovswitching DSGE models for the euro area (EA) and the US. The estimations show that until mid-2014 the ECB's response to in ation was more forceful when in ation was above 2% than below 2%. Since then, the ECB's...

Forward guidance operates via the expectations formation process of the agents in the economy. In standard quantitative macroeconomic models, the expectations are unobserved state variables and little scrutiny is devoted to analysing the dynamic behaviour of these expectations. We show that the...

This paper develops a simple, consistent methodology for generating empirically realistic forward guidance simulations using existing macroeconomic models by modifying expectations about policy announcements. The main advantage of our method lies in the exact preservation of all other shock...

This paper examines the interactions of macroprudential and monetary policies. We find, using a range of macroeconomic models used at the European Central Bank, that in the long run, a 1% bank capital requirement increase has a small impact on GDP. In the short run, GDP declines by 0.15-0.35%....

We study alternative monetary policy strategies in the presence of the lower bound on nominal interest rates and a low equilibrium real rate using an estimated DSGE model for the euro area. We demonstrate that simple feedback rules that implement inflation targeting result in a binding lower...