We study the transmission of monetary shocks and monetary policy with a behavioral model, corrected for potential misspecification using the DSGE-VAR framework elaborated by DelNegro and Schorfheide (2004). In particular, we investigate if the central bank should react to movements in the...

The changing and unpredictable nature of the money demand function has led many Central Banks authorities around the world to shift from exchange rate and monetary policy targeting to inflation targeting framework. The gradual shift to inflation targeting has reawakened interest in the Taylor's...

In this paper, we study the dynamics and drivers of sovereign bond yields in euro area countries using a factor model with time-varying loading coeffi cients and stochastic volatility, which allows for capturing changes in the pricing mechanism of bond yields. Our key contribution is exploring...

Two model averaging approaches are used and compared in estimating and forecasting dynamic factor models, the well-known BMA and the recently developed WALS. Both methods propose to combine frequentist estimators using Bayesian weights. We apply our framework to the Armenian economy using...

This paper has two main objectives. The first objective is to propose a new indicator of core inflation, which is obtained by cleaning month on month relative price fluctuations from overall price changes and idiosyncratic dynamics. We use a factor model with the subcomponents of CPI inflation...

Great Recession 2007-2008 has revived interest to quantity aggregates (money and credit) and their role as indicators of financial instability for monetary and macroprudential policy. However, many of the previous empirical studies inspecting indicator properties used univariate methods and did...

Credit boom detection methodologies (such as threshold method) lack robustness as they are based on univariate detrending analysis and resort to ratios of credit to real activity. I propose a quantitative indicator to detect atypical behavior of credit from a multivariate system - a monetary...

We study the transmission of monetary shocks and monetary policy with a behavioral model, corrected for potential misspecification using the DSGE-VAR framework elaborated by DelNegro and Schorfheide (2004). In particular, we investigate if the central bank should react to movements in the...

The paper contributes to understanding the economic dynamics at the zero lower bound and the exchange rate movements under different central bank intervention regimes. It provides a theoretical framework for modeling foreign exchange interventions at the ZLB within a dynamic general equilibrium...

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...