Dynamic Stochastic General Equilibrium (DSGE) models are now considered attractive by the profession not only from the theoretical perspective but also from an empirical standpoint. As a consequence of this development, methods for diagnosing the fit of these models are being proposed and...

This chapter concentrates on the Econometrics of Monetary Policy. We describe the evolution of models estimated to evaluate the macroeconomic impact of the effect of monetary policy . We argue that the main challenge for the econometrics of monetary policy is the combination of theoretical...

The dynamic dividend growth model (Campbell&Shiller, 1988) linking the log dividend yield to future expected dividend growth and stock market returns has been extensively used in the literature for forecasting stock returns. The empirical evidence on the performance of the model is mixed as its...

The aim of this paper is to propose a new method for forecasting Italian inflation. We expand on a standard factor model framework (see Stock and Watson (1998)) along several dimensions. To start with we pay special attention to the modeling of the autoregressive component of the inflation....

The objective of this study is to investigate the behaviour of monetary and fiscal authorities in the Euro area. Our main contribution is joint modelling of behaviour of the two authorities. Our investigation highlights a number of facts. The systematic monetary policies adopted by the...

Observed policy rates are smooth. Why should central banks smooth interest rates? We investigate if model uncertainty and parameters instability are a valid reason. We do so by implementing a novel ´´thick recursive modelling´´ approach within the framework of small structural macroeconomic...

Exogenous measures of monetary policy shocks, directly derived from financial market information, are used in close (US) and open (US-Germany) economy VAR models to evaluate the robustness of the dynamic effect of monetary policy obtained from traditional identified VAR. The empirical analysis...

In this paper we jointly estimate a forward-looking reaction function for the three-month rate alongwith a term structure relationship linking the six-month interest rates to current and expected future three-month rates. In our empirical model the response of the six-month interest rates to...

In this paper we propose an approach to identify indipendently the parameters describing the structure of the economy from the parameters describing central bank preferences. We first estimate the parameters describing the structure of the US economy by considering a parsimonious specification...

This paper explores the extent to which predictability of asset returns could be exploited for dynamic portfolio allocation among several (seven) assets taking model uncertainty explicitly into account.We consider model uncertainty when solving the problem of a representative fund manager who...