Economic fluctuations in most of the industrialised world have for over the past 30 years been characterised by declining volatility. This decline has also been a trait witnessed for output fluctuations in the Euro Area. This paper has two objectives. The first is to provide a comprehensive...

We use a simple model of a closed economy to study the recommendations of monetary policy-makers attempting to respond optimally to an asset-price bubble whose stochastic properties they understand. We focus on the impact which the zero lower bound (ZLB) on nominal interest rates has on the...

The output gap – the difference between actual and potential output – is widely regarded as a useful guide to future inflationary pressures, as well as an important indicator of the state of the economy in its own right. Since the output gap is unobservable, however, its estimation is prone...

Analysts typically use a variety of techniques to forecast inflation. These include both ‘bottom-up’ approaches, for near-term forecasting, as well as econometric methods (such as mark-up models of inflation, which have been found to perform quite well for Australia – see de Brouwer and...

A 2008-ban kirobbant pénzügyi válság ráirányította a figyelmet a főáramú makroökonómiára, amely a válság előrejelzésében és magyarázatában igen gyenge teljesítményről tett tanúbizonyságot. Az elmúlt másfél-két évtizedben az újklasszikus és az újkeynesi iskola...

Modern DSGE models are microfounded and have deep parameters that should be invariant to changes in economic policy, so in principle they are not subject to the Lucas critique. But the literature has already established that misspecification issues also cause parameter instability after policy...

The path of output prior to the financial and economic crisis turned out to be not sustainable and lower than previously estimated in some European crisis countries. Specifically, the output gaps have been underestimated (and inversely potential output overestimated) before the recent crisis. It...

A recent notable development in the empirical macroeconomics literature has been the rapid growth of papers that build structural models, which include a number of frictions and shocks, and which are confronted with the data using sophisticated full-information econometric approaches, often...