This paper illustrates the tools used at Banca d’Italia (BI) to monitor the evolution of inflation expectations. The paper also surveys the analyses conducted at BI to assess how inflation expectations affect agents’ choices and the economy. The first part discusses the measures of inflation...

We investigate the relationship between macroeconomic conditions and banks' balance sheets by referring to a modified version of the Bank of Italy Quarterly Model (BIQM), regularly used for forecasting and policy analysis. In particular, we examine how regulatory bank capital and private sector...

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...

We review the experience of central banks in 12 advanced economies in formulating their price stability objectives during the last 20 years. All central banks under review target a small and positive inflation rate (typically 2%). In most cases, they set a point target, in some a range or a...

This paper examines the history and the determinants of bank profits in Italy from 2005-15. We first identify a number of key stylized facts by comparing the income statement of Italian lenders with that of banks in other European countries. The comparison suggests that the profitability gap of...

This paper presents the results of a counterfactual exercise that aims at quantifying the contribution to the evolution of bad debts made by the two recessions that have hit the Italian economy since 2008. The counterfactual simulations are performed using the Bank of Italy's Quarterly Model...

The paper assesses the performance of medium-term forecasts of euro-area GDP and inflation obtained with a DSGE model and a BVARX model currently in use at the Bank of Italy. The performance is compared with that of simple univariate models and with the Eurosystem projections; the same real time...