We assess the fiscal behaviour in the European Union countries for the period 1990-2005 via the responsiveness of budget balances to several determinants. The resultsshow that the existence of effective fiscal rules, the degree of public spendingdecentralization, and the electoral cycle can...

This paper reviews recent approaches to modeling the labour market and assessestheir implications for in‡ation dynamics through both their e¤ect on marginalcost and on price-setting behaviour. In a search and matching environment, weconsider the following modeling setups: right-to-manage...

Liquidity provision through its repo auctions has been one of the main instrumentsof the European Central Bank (ECB) to address the recent tensions infinancial markets since summer 2007. In this paper, we analyse banks’ biddingbehaviour in the ECB’s main refinancing operations (MROs) during...

Factor based forecasting has been at the forefront of developments in the macroeconometricforecasting literature in the recent past. Despite the flurry of activityin the area, a number of specification issues such as the choice of the number offactors in the forecasting regression, the benefits...

This paper estimates the wealth effects on consumption in the euro area as a whole. Ishow that: (i) financial wealth effects are relatively large and statistically significant;(ii) housing wealth effects are virtually nil and not significant; (iii) consumptiongrowth exhibits strong persistence...

We use a cohort based model to analyse determinants of labour force participation fordisaggregated groups of workers in the euro area and the five largest euro areacountries. The model captures age and cohort effects as indicators of (unobserved)determinants of participation behaviour. We use...

This paper examines the impact of downward wage rigidity (nominal and real) onoptimal steady-state inflation. For this purpose, we extend the workhorse model ofErceg, Henderson and Levin (2000) by introducing asymmetric menu costs for wagesetting. We estimate the key parameters by simulated...

In this paper we present an extension of the Taylor model with staggered wages inwhich wage-setting is also influenced by reference norms (i.e. by benchmark wages).We show that reference norms can considerably increase the persistence of inflationand the extent of real wage rigidity but that...

We reappraise the relationship between productivity and equilibrium real exchangerates using a panel estimation framework that incorporates a large number ofcountries and importantly, a dataset that allows explicit consideration of the role ofnon-traded, as well as traded, sector productivity...

We estimate time-varying expected excess returns on the US stock market from 1983to 2008 using a model that jointly captures the arbitrage-free dynamics of stockreturns and nominal bond yields. The model nests the class of affine term structure (ofinterest rates) models. Stock returns and bond...