In this paper we extend the behavioral macroeconomic model as proposed by De Grauwe (2012) to include a banking sector. The behavioral model takes the view that agents have limited cognitive limitations. As a result, it is rational to use simple forecasting rules and to subject the use of these...

This paper provides a critical overview of the state of the art in the economics literature on structural reforms. It takes stock of theoretical developments, measurement efforts and of the econometric evidence. We start with a simple theoretical framework for the relationship between structural...

In this paper we analyze the effectiveness of sterilized interventions in the foreign exchange market. We use a model in which chartists and fundamentalists interact. This model produces speculative noise which leads to systematic deviations of the exchange rate from its fundamentals. In such an...

Controversies surrounding the European sovereign debt crisis loom prominent in the public debate. From a legal perspective, the no-bailout rule and the ban on monetary financing constitute the main principles governing the legality review of financial assistance and liquidity measures....

This chapter provides a critical overview of the state of the art in the economics literature on structural reforms. It takes stock of theoretical developments, measurement efforts and of the econometric evidence. We start with a simple theoretical framework for the relationship between...

We analyse the use of current and forward-looking data in the setting of monetary policy (Taylor rule). We answer the question of whether the use of forward-looking data is to be preferred over the use of current data. We use a behavioural macroeconomic model that generates periods of...

Abstract. We study the functioning of a system in the presence of the zero lower bound constraint on the nominal interest rate under the assumption that agents have limited cognitive capabilities. In order to do so, we employ a micro founded heterogeneous expectations New Keynesian model in...

DSGE-models have become important tools of analysis not only in academia but increasingly in the board rooms of central banks. The success of these models has much to do with the coherence of the intellectual framework it provides. The limitations of these models come from the fact that they...