We study fiscal behaviour and the sovereign yield curve in the U.S. and Germany in the period 1981:I-2009:IV. The latent factors, level, slope and curvature, obtained with the Kalman filter, are used in a VAR with macro and fiscal variables, controlling for financial stress conditions. In the...

The paper analyses and compares the role that the tightening in liquidity conditions and the collapse in risk appetite played for the global transmission of the financial crisis. Dealing with identification and the large dimensionality of the empirical exercise with a Global VAR approach, the...

There is already a substantial literature documenting the fact that low yield currencies typically appreciate during times of global financial stress and behave as safe havens. The main objective of this paper is to find out what the fundamentals of safe haven currencies are. We analyse a large...

This paper develops a framework for assessing systemic risks and for predicting (out-of-sample) systemic events, i.e. periods of extreme financial instability with potential real costs. We test the ability of a wide range of “stand alone” and composite indicators in predicting systemic...

The banking system is modeled in a closed system of financial accounts, whereby the equilibrium volume of bank intermediation between households and corporates reflects structural parameters such as household preferences, comparative cost structures of heterogeneous banks, loan demand of...

This paper uses a time-varying Factor Augmented VAR to investigate the evolving transmission of monetary policy and demand shocks in the UK. Simultaneous estimation of time-varying impulse responses of a large set of macroeconomic variables and disaggregated prices suggest that the response of...

Central banks regularly communicate about financial stability issues, by publishing Financial Stability Reports (FSRs) and through speeches and interviews. The paper asks how such communications affect financial markets. Building a unique dataset, it provides an empirical assessment of the...

The 2007-2010 financial crisis highlighted the central role of financial intermediaries’ stability in buttressing a smooth transmission of credit to borrowers. While results from the years prior to the crisis often cast doubts on the strength of the bank lending channel, recent evidence shows...

We evaluate the ECB’s monetary policy strategy against the underlying economic structure of the euro area economy, in normal times and in times of severe financial dislocations. We show that in the years preceding the financial crisis that started in 2007 the strategy was successful at...

A growing number of papers have studied positive and normative implications of financial frictions in DSGE models. We contribute to this literature by studying the welfare-based monetary policy in a two-country model characterized by financial frictions, alongside a number of key features, like...