The closed economy macro literature has shown that a liquidity trap can result from the self-fulfilling expectation that future inflation and output will be low (Benhabib et al. (2001)). This paper investigates expectations-driven liquidity traps in a two-country New Keynesian model of a...

The global financial crisis (2008-09) led to a sharp contraction in both Euro Area (EA) and US real activity, and was followed by a long-lasting slump. However, the post-crisis adjustment in the EA and the US shows striking differences—in particular, the EA slump has been markedly more...

We estimate a three-country model using 1995-2013 data for Germany, the Rest of the Euro Area (REA) and the Rest of the World (ROW) to analyze the determinants of Germany's current account surplus after the launch of the Euro. The most important factors driving the German surplus were positive...

The credit risk exposure of the German banking system is growing again after the 2009 peak and its subsequent reduction. This column comments it through the lens of the Target2 net balances in connection with the capital flows experienced by the Eurozone (EZ) balance of payments. Several aspects...

The global financial crisis (2008-09) led to a sharp contraction in both Euro Area (EA) and US real activity, and was followed by a long-lasting slump. However, the post-crisis adjustment in the EA and the US shows striking differences - in particular, the EA slump has been markedly more...

The closed economy macro literature has shown that a liquidity trap can result from the self-fulfilling expectation that future inflation and output will be low (Benhabib et al. (2001)). This paper investigates expectations-driven liquidity traps in a two-country New Keynesian model of a...

This paper aims to propose a new measure of exchange market pressure for countries operating in hard peg regimes, such as currency unions, currency boards or full dollarization. We use a general model of currency crisis to derive a sustainability index based upon the relationship between the...

In this paper we analyse the exchange rate pass-through (ERPT) in the euro area as a whole and for four euro area members - Germany, France, Italy and Spain. For that purpose we use Bayesian VARs with identfiication based on a combination of zero and sign restrictions. Our results emphasize that...

The effect of the euro exchange rate on inflation has taken on significant importance recently, with the application of the ECB's expansionary monetary policy measures having coincided with episodes of euro appreciation, such as that observed between the second half of 2017 and early 2018, which...