Nominal and real interest rates in advanced economies have been decreasing since the mid-1980s and reached historical low levels in the aftermath of the global financial crisis. Understanding why interest rates have fallen is essential for both monetary policy and financial stability. This paper...

A two-country model that incorporates many features proposed in the New Open Economy Macroeconomics literature is developed in order to replicate the volatility of the real exchange rate and its disconnect with macroeconomic variables. The model is estimated using data for the euro area and the...

The ability of a two-sector model to quantify the contribution of the housing market to business fluctuations is investigated using U.S. data and Bayesian methods. The estimated model, which contains nominal and real rigidities and collateral constraints, displays the following features: first,...

This paper studies the effects of fiscal policy on private GDP, inflation and the long-term interest rate in Italy using a structural vector autoregression model. To this end, a database of quarterly cash data for selected fiscal variables for the period 1982:1-2004:4 is constructed, largely...

In New Keynesian models favourable cost-push shocks lower inflation and increase output. Yet, when the central bank's inflation target is not perfectly observed these shocks turn contractionary as agents erroneously perceive a temporary reduction in the target. This effect is amplified when...

This paper estimates the effects of technology shocks in VAR models of the U.S., identified by imposing restrictions on the sign of impulse responses. These restrictions are consistent with the implications of a popular class of DSGE models, with both real and nominal frictions, and with...

Inflation in the euro area has been falling since mid-2013, turned negative at the end of 2014 and remained below target thereafter. This paper employs a Bayesian VAR to quantify the contribution of a set of structural shocks, identified by means of sign restrictions, to inflation and economic...

This paper studies the transmission of monetary policy shocks from the US to the euro-area using a two-country structural VAR with no exogeneity assumption. The analysis reveals the following results. First, in response to an unexpected increase in the Federal funds rate, the euro immediately...

Long-term inflation expectations in the euro area reached historically low levels at the end of 2019, suggesting a possible de-anchoring from the European Central Bank’s “below, but close to, 2 per cent” inflation aim. The decline in long-term inflation expectations exerted a downward...

This paper assesses the anchoring of long-term inflation expectations in the euro area, a key issue from a monetary policy perspective, using a range of measures of inflation expectations and methods. The overall reading of the evidence is that long-term inflation expectations in the euro area...