This paper uses panel vector autoregressive models and simulations of an estimated DSGE model to explore the reaction of Euro area banks to the global financial crisis. We focus on their interest rate setting behavior in response to standard macroeconomic shocks. Our main empirical finding is...

We use a compound option-based structural credit risk model to infer a term structure of banking crisis risk from market data on bank stocks in daily frequency. Considering debt service payments with different maturities this term structure assigns a separate estimator for short- and long-term...

The risk of catastrophes is one of the greatest threats by climate change. Yet, the most common Integrated Assessment Models produce the counterintuitive result that a higher concern about climate change risks does not lead to stronger near-term abatement efforts. This paper probes whether this...

I construct risk-sensitive approximations of policy functions of DSGE models around the stochastic steady state and ergodic mean that are linear in the state variables. The method requires only the solution of linear equations using standard perturbation output to construct the approximation and...

This paper improves the estimation procedure of the Multifractal Random Walk model by means of an optimal iterated Generalized Method of Moments (GMM) estimator using an enhanced moments function. We report good estimation results within the scope of a Monte Carlo simulation study, with normally...

We analyze the theoretical moments of a nonlinear approximation to real business cycle model with stochastic volatility and recursive preferences. We nd that the conditional heteroskedasticity of stochastic volatility operationalizes a time-varying risk adjustment channel that induces...

We model the dynamics of the euro area yield curve using a shadow-rate term structure model (SRTSM), with particular attention to the period since late 2011 when interest rates have been at the lowest level since the inception of EMU. The shadow rate is driven by latent factors with linear...

We study the determinants of bond spreads of euro area sovereigns since the introduction of the euro. We show that an aggregate risk factor is a main driver of spreads. The aggregate risk factor also plays an important role for sovereign risk through its interaction with the size and structure...

We trace the impact of the European Central Bank (ECB) asset purchase programme (APP) on the yield curve. Exploiting granular information on sectoral asset holdings and ECB asset purchases, we construct a novel measure of the "free-float of duration risk" borne by pricesensitive investors. We...

Incorporating arbitrage-free term-structure dynamics into a semi-structural macro-model, we jointly estimate the real equilibrium interest rate (r*), trend inflation, and term premia for the United States and the euro area, using a Bayesian approach. The natural real rate and trend inflation are...