A shift in taxes or in government spending (a ”fiscal shock”) at some point in time puts a constraint on the path of taxes and spending in the future, since the government intertemporal budget constraint will eventually have to be met. This simple fact is surprisingly overlooked in analyses...

This paper starts from the observation that parameter instability and model uncertainty are relevant problems for the analysis of monetary policy in small macroeconomic models. We propose to deal with these two problems by implementing a novel ‘thick recursive modelling’ approach. At each...

This paper is a first attempt at evaluating the determinants of the total interest rate differentials on government bonds between high yielders, namely Spain, Italy, Sweden, and Germany. In particular, we address the question of the relative importance of local and global factors in the...

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...

In this paper we concentrate on the hypothesis that the empirical rejections of the Expectations Theory(ET) of the term structure of interest rates can be caused by improper modelling of expectations. Our starting point is an interesting anomaly found by Campbell-Shiller(1987), when by taking a...

The empirical VAR literature on the monetary transmission mechanism in open economies has not yet provided a commonly accepted solution to the problem of simultaneity between interest rates and the exchange rate. In this paper we propose to solve the identification problem by using information...

This paper argues that a stable broad money demand for the euro area over the period 1980–2011 can be obtained by modelling cross border international portfolio allocation. As a consequence, model-based excess liquidity measures, namely the difference between actual M3 growth (net of the...

This paper proposes an extension to Global Vector Autoregressive (GVAR) models to capture time-varying interdependence among financial variables. Government bond spreads in the euro area feature a time-varying pattern of co-movement that poses a serious challenge for econometric modelling and...