This article empirically studies the linkages between financial variable downturns and economic recessions. We present evidence that real asset prices tend to lead real cycles, while loan-to-GDP and loan-to-deposit ratios lag them. Using a probit analysis, we document that downturns in real...

This paper analyses the transmission of financial shocks to the macroeconomy. The role of macro-financial linkages is investigated from an empirical perspective for the euro area as a whole, for individual euro area member countries and for other EU and OECD countries. The following key economic...

This paper evaluates the monetary and macroprudential policies that mitigate the procyclicality arising from the interlinkage4s between current account deficits and financial vulnerabilities. We develop a two-country dynamic stochastic general equilibrium (DSGE) model with heterogeneous...

Survey data suggests that news of changes in business conditions are significantly related to house prices and consumers' beliefs of favorable buying conditions in the housing market. This paper explores the transmission of "news shocks" as a source of boom-bust cycles in the housing market....

This paper revisits the empirical relationship between unemployment and output, and its evolution following the financial crisis of 2008, with the aim of drawing potential consequences for labour market modelling strategies in place within the European System of Central Banks (ESCB). First, the...

We analyse the determination of taxes on harmful goods when consumers have self-control problems. We show that under reasonable assumptions, the socially optimal corrective tax exceeds the average distortion caused by self-control problems. Further, we analyse how individuals with self-control...

We depart from the common reaction function-based approach used to infer central bank preferences. Instead, we extract the tone from the textual information in the central bank communication using both a lexicon-based approach and a language model. We combine the tone with real-time information...

We study public funding of banks and non-financial firms in a time of crisis. We find that bank capitalization is more effective in stabilizing the economy than direct funding to firms, but it also creates larger distortions. We show that the optimal, social-welfare-maximizing, structure of a...

We measure the tone (sentiment) of the ECB's Governing Council regarding economic outlook at the time of each monetary policy meeting and use this information together with the Eurosystem/ECB staff macroeconomic projections to directly estimate the Governing Council's loss function. Our results...

We analyze the economic performance of di§erent monetary policy strategies, or rules, in a low interest rate environment, using simulations with a DSGE model which has been estimated for the euro area. We study how often the e§ective lower bound of interest rates (ELB) is likely to bind, and...