In this paper we examine why monetary aggregates of euro area Member States have developed differently since the inception of the euro. We derive a money demand equation that incorporates housing wealth and collateral as well as substitution effects on real money holdings. Empirically, we show...

Structural VAR studies disagree with narrative accounts about the history of monetary policy disturbances. We investigate whether employing the narrative monetary shock account as a proxy variable in a VAR model aligns both shock series. We quantify the extent to which the disagreement still...

The recent global financial crisis has increased interest in macroeconomic models that incorporate financial linkages. Here, we compare the simulation properties of five mediumsized general equilibrium models used in Eurosystem central banks which incorporate such linkages. The financial...

We study in a VAR model the effects of monetary policy shocks with new Italian flow of funds data for 1980-2002. First, our results are consistent with the literature, without being affected by commonly found puzzles. Second, new features of the transmission of monetary policy shocks to the...

We study how determinacy and learnability of global rational expectations equilibrium may be affected by monetary policy in a simple, two country New Keynesian framework. We seek to understand how monetary policy choices may interact across borders to help or hinder the creation of a unique REE...

I introduce a method to transform a T-map when agents form expectations using a misspecified learning mechanism inconsistent with a structural equation of a multivariate economic model. By transforming the perceived law of motion (PLM) into a the form of a Seemingly Unrelated Regression (SUR)...

The monetary policy literature has recently devoted considerable attention to Taylor-type rules, in which the interest rate set by the central bank depends on measures of inflation and aggregate output. We show that if policy-makers attempt to choose the optimal rule within a Taylor-type...

This paper investigates the precision of multivariate models of the output gap and considers their implications for the formulation of macroeconomic policy. Multivariate models identify the gap by including information from structural economic relationships, such as Okun's Law, the Phillips...

The lack of euro area labour market flexibility is a commonly mentioned issue. In particular, the relatively weak response of wages to high unemployment can pose adjustment problems. We address the issue using extensive simulations of an estimated macro-econometric model for the euro area (the...