We develop an agent-based model for the euro area that fulfils widely recommended requirements for nextgeneration macroeconomic models by i) incorporating financial frictions, ii) relaxing the requirement of rational expectations, and iii) including heterogeneous agents. Using macroeconomic and...

In the framework of a new money market econometric model, we assess the degree of precision achieved by the European Central Bank ECB) in meeting its operational target for the short-term interest rate and the impact of the U.S. sub-prime credit crisis on the euro money market during the second...