We study business cycles with cyclical returns to scale. Contrary to tightly parameterized production functions (Cobb-Douglas and Constant Elasticity of Substitution), we empirically identify strong input complementarity that leads to procyclical returns to scale. We therefore propose a flexible...

We propose a novel framework where forward guidance (FG) is endogenously determined. Our model assumes that a monetary authority solves an optimal policy problem under commitment at the zero-lower bound. FG derives from two sources: 1. from commiting to keep interest rates low at the exit of the...

We propose a novel framework where forward guidance (FG) is endogenously determined. Our model assumes that a monetary authority solves an optimal policy problem under commitment at the zero-lower bound. FG derives from two sources: 1. from commiting to keep interest rates low at the exit of the...

This paper studies the role of the exchange rate regime for trade of new products. It first provides VAR evidence that a rise in external productivity shifts trade away from new products and more so in fixed regimes. Then, it presents a model with firm dynamics in line with this evidence. We...

Empirical evidence suggests that considerable differentials in inflation rates exist across households. This paper investigates how central banks should react to household inflation heterogeneity in a tractable New Keynesian model. We include two households that differ in their consumer price...

Population growth rates have fallen considerably in most developed countries. An important question for monetary policy is whether this has led to a fall in the natural rate of interest. In representative agent models, the response of the natural rate to a fertility shock crucially depends on...

DSGE (Dynamic stochastic general equilibrium) models are the common workhorse of modern macroeconomic theory. Whereas story-telling and policy analysis were in the forefront of applications since its inception, the forecasting perspective of DSGE models is only recently topical. In this study,...

DSGE models are typically estimated using Bayesian methods, but a researcher may want to estimate a DSGE model with full information maximum likelihood (FIML) so as to avoid the use of prior distributions. A very robust algorithm is needed to find the global maximum within the relevant parameter...

We study the properties of the IMF-WEO estimates of real-time output gaps for countries in the euro area as well as the determinants of their revisions over 1994-2017. The analysis shows that staff typically saw economies as operating below their potential. In real time, output gaps tend to have...

For over a decade of practicing inflation targeting (IT) strategy, inflation has remained high and persistent while economic growth momentum has boosted in Ghana. This paper investigates the relative macroeconomic benefits of the IT strategy in Ghana based on business cycle fluctuations and...