Inflation in the euro area has been falling steadily since early 2013 and at the end of 2014 turned negative. Part of the decline has been due to oil prices, but the weakness of aggregate demand has also played a significant role. This paper uses a VAR model to quantify the contribution of oil...

Since 2013 the inflation rate in the euro area has fallen steadily, reaching all-time lows at the end of 2014. Market-based measures of inflation expectations (such as inflation swaps) have also declined to extremely low levels, which suggests increasing concern about the credibility of the ECB...

This paper uses a Factor Augmented Vector Autoregressive model to assess the macroeconomic impact of the euro-area sovereign debt crisis and the effectiveness of the European Central Bank's conventional monetary policy. First, our results show that in the countries most affected by the crisis,...

This paper analyses the macroeconomic effects of a protracted period of low and falling inflation rates when monetary policy is constrained by the zero lower bound (ZLB) on nominal interest rates and the private sector is indebted in nominal terms (debt-deflation channel). In this scenario, even...

This paper provides evidence of de-anchoring of long-term inflation expectations in the euro area based on both time series and panel methods and data from the ECB Survey of Professional Forecasters. Long-term inflation expectations recorded two sharp and permanent declines: the first after the...

A New Keynesian model calibrated to the euro area is used to evaluate the stabilization properties of alternative monetary policy strategies when the natural interest rate is low (‘new normal’) and the probability of reaching the effective lower bound (ELB) is non-negligible. Price level...