In this article, we analyse the conduct of optimal monetary policy for the new euro area. The aggregate euro area economy is modelled to have relatively sluggish adjustment properties and a private sector with mainly backward-looking expectations. In this economy, we assume that the central bank...

The lack of euro area labour market flexibility is a commonly mentioned issue. In particular, the relatively weak response of wages to high unemployment can pose adjustment problems. We address the issue using extensive simulations of an estimated macro-econometric model for the euro area (the...

In this paper, we examine the cost of insurance against model uncertainty for the Euro area considering four alternative reference models, all of which are used for policy-analysis at the ECB.We find that maximal insurance across this model range in terms of aMinimax policy comes at moderate...

In this paper, we examine the cost of insurance against model uncertainty for the euro area considering four alternative reference models, all of which are used for policy analysis at the ECB. We find that maximal insurance across this model range in terms of a Minimax policy comes at moderate...

This paper investigates how the sector-specific source or the changing sectoral composition of labor productivity has contributed to aggregate beta convergence, using a newly constructed eight-sector database. The main findings are twofold. First, both within and sectoral reallocation have...

The global financial crisis is leading to a revival of the empirical literature on current account imbalances. This paper contributes to the literature by investigating the importance of model and parameter uncertainty to assess external imbalances. Panel data, current account models, model...