This paper studies monetary policy in the Euro area looking at the variable most directly related to current and expected monetary policy, the yield on long term government bonds. We find that the level of longterm rates in Europe is almost entirely explained by U.S. shocks and by the systematic...

We use the time series of shifts in U.S. taxes constructed by Romer and Romer to estimate tax multipliers. Differently from the single-equation approach adopted by Romer and Romer, our estimation strategy (a Var that includes output, government spending and revenues, inflation and the nominal...

Fiscal consolidations achieved by means of spending cuts are much less costly in terms of output losses than tax-based ones. The difference cannot be explained by accompanying policies, including monetary policy, and it is mainly due to the different response of business confidence and private...

The aim of this paper is to show how the richer frequency and variety of fiscal policy shocks available in an international sample can be analyzed recognizing the heterogeneity that exists across different countries. The main conclusion of our empirical analysis is that the question “what is...

In this paper, we provide new evidence on the determinants of sovereign yield spreads and contagion effects in the euro area in order to evaluate the rationale for a common Eurobond jointly guaranteed by euro-area Member States. We find that default risk is the main driver of yield spreads,...

A characteristic function-based method is proposed to estimate the time-changed L´evy models, which take into account both stochastic volatility and infinite-activity jumps. The method facilitates computation and overcomes problems related to the discretization error and to the non-tractable...

Consumption is striking back. Some recent evidence indicates that the well-known asset pricing puzzles generated by the difficulties of matching fluctuations in asset prices with high frequency fluctuations in consumption might be solved found by considering consumption in the long-run. A first...

This paper brings together two strands of the empirical macro literature:the reduced-form evidence that the yield spread helps in forecasting output and the structural evidence on the difficulties of estimating the effect of monetary policy on output in an intertemporal Euler equation. We show...

The paper explores the determinants of yield differentials between sovereign bonds in the Euro area. There is a common trend in yield differentials, which is correlated with a measure of aggregate risk. In contrast, liquidity differentials display sizeable heterogeneity and no common factor. We...

In this paper we assess the possibility of producing unbiased forecasts for fiscal variables in the euro area by comparing a set of procedures that rely on different information sets and econometric techniques. In particular, we consider ARMA models, VARs, small scale semi-structural models at...