This paper proposes a simple explanation for the frequent appearance of a price puzzle in VARs designed for monetary policy analysis. It suggests that the best method of solving the puzzle implies a close connection between theory and empirics rather than the introduction of a commodity price....

Over the last two decades the intensity of credit standards' tightening during economic contractions has exceeded their easing during expansions among euro area banks. This mechanism is fed by the boom-bust cycle of credit that, as much research has shown, is linked to financial instability with...

This paper analyzes the implications of responding to either the model-based New Keynesian output gap or to its estimates, and in particular, a Hodrick-Prescott filtered output gap or a linearly detrended output gap. Responding to these estimates instead of to the “true” unobserved output...