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...

The debate on the underlying causes of the decline of interest rates to historically low levels is ongoing both in academia and among policy makers. Several explanations have been put forward, ranging from those citing real and structural factors to those underscoring the importance of cyclical...

We identify the drivers of the movements in the euro-dollar exchange rate during the sovereign debt crisis. In particular, we show that the announcement of outright monetary transactions (OMT) by the Governing Council of the ECB during the summer of 2012 played a major role in the euro's...

The paper estimates a closed-economy medium-scale model for the United States and the euro area to assess the current level of the natural rate of interest and shed light on its drivers. The dynamics of the model are driven by permanent and transitory shocks that bear some connection to the...

Survey-based long-term inflation in the euro area reached historically low levels at the end of 2019, pointing to their disanchoring. A structural VAR analysis shows that the decline in long-term expectations exerted a downward pressure on inflation during the 2013-14 disinflation and then in...

The contribution of energy shocks to euro-area inflation in 2022 is larger than that of shocks to aggregate and supply, and to monetary policy. Had the ECB tightened monetary policy more than implied by the actual policy rate to counter the energy shocks, growth and inflation would have been...