This paper presents the results of a quantitative study of the implications of the zero lower bound on nominal interest rates which was undertaken in the context of the review of the ECBu0092s monetary policy strategy in Spring 2003. Focusing on the euro area, the paper provides an assessment of...

Standard economic models hold that exchange rates are influenced by fundamental variables such as relative money supplies, outputs, inflation rates and interest rates. Nonetheless, it has been well documented that such variables little help predict changes in floating exchange rates u0097 that...

In this paper we estimate simple Taylor rules paying particular attention to interest rate smoothing. Following English, Nelson, and Sack (2002), we employ a model in first differences to gain some insights into the presence and signifcance of the degree of partial adjustment as opposed to a...

This paper employs stochastic simulations of a small structural rational expectations model to investigate the consequences of the zero bound on nominal interest rates. We find that if the economy is subject to stochastic shocks similar in magnitude to those experienced in the U.S. over the...

This paper investigates the performance of optimised interest rate rules when there is uncertainty about a key determinant of the monetary transmission mechanism, namely the degree of persistence characterising the inflation process. The paper focuses on the euro area and utilises two variants of...

We revisit recent evidence on how monetary policy affects output and prices in the U.S. and in the euro area. The response patterns to a shift in monetary policy are similar in most respects, but differ noticeably as to the composition of output changes. In the euro area investment is the...

This paper proposes a new paradigm for the analysis of monetary policy. From an econometric point of view this new approach is just as easy to implement as reduced form analysis, but is robust to the Lucas critique. It requires no explicit prior theory and yet it encompasses all standard DSGE...

In this paper we first explore the impact of nominal and real persistence on the transmission process of various shocks in an estimated DSGE model of euro area. We then analyse its impact on optimal monetary policy and investigate the performance of various monetary policies when the policy...

We examine the euro area monetary policy transmission process using post-1999 data, with two main questions in mind: has it changed after u0096 and because of u0096 EMU and, if so, is it becoming homogeneous across countries. Given the data limitations, we concentrate on three blocks of...

This paper analyses the international transmission of monetary shocks with a special focus on the effects of foreign money ("global liquidity") on the euro area. We estimate structural VAR models for the euro area and the global economy including a global liquidity aggregate. The impulse...