In view of the increasing use of Dynamic Stochastic General Equilibrium (DSGE) models in the macroeconomic projections and the policy process, this paper examines, both conceptually and empirically, alternative notions of potential output within DSGE models. Furthermore, it provides historical...

The business cycle is alive and well, and real variables respond to it more or less as they always did. Witness the Great Recession. Inflation, in contrast, has gone quiescent. This paper studies the sources of this disconnect using VARs and an estimated DSGE model. It finds that the disconnect...

In this paper we review the methodology of forecasting with log-linearised DSGE models using Bayesian methods. We focus on the estimation of their predictive distributions, with special attention being paid to the mean and the covariance matrix of h-step ahead forecasts. In the empirical...

This paper shows how to compute the h-step-ahead predictive likelihood for any subset of the observed variables in parametric discrete time series models estimated with Bayesian methods. The subset of variables may vary across forecast horizons and the problem thereby covers marginal and joint...

This paper compares within-sample and out-of-sample fit of a DSGE model with rational expectations to a model with adaptive learning. The Galí, Smets and Wouters model is the chosen laboratory using quarterly real-time euro area data vintages, covering 2001Q1–2019Q4. The adaptive learning...

We analyze the optimal window length in the average inflation targeting rule within a Behavioral THANK model. The central bank faces an occasionally binding effective lower bound (ELB) or persistent supply shocks, and can also use quantitative easing. We show that the optimal averaging period is...

This paper introduces a Bayesian Quantile Factor Augmented VAR (BQFAVAR) to examine the asymmetric effects of monetary policy throughout the business cycle. Monte Carlo experiments demonstrate that the model effectively captures non-linearities in impulse responses. Analysis of aggregate...

The COVID-19 crisis has affected economic sectors very heterogeneously, with possible risks for permanent losses in some sectors. This paper presents a sectoral-level, bottom- up method to estimate euro area potential outputin order to assess the impact of the crisis on it. The estimates are...

This paper investigates the importance of including data on new housing supply in Dynamic Stochastic General Equilibrium (DSGE) models in forecasting the Great Financial Crisis (GFC), focusing on the U.S. While existing models have added a financial sector and real estate sector, they have...

We study the incidence and severity of lower-bound episodes and the efficacy of three types of state-dependent policies - forward guidance about the future path of interest rates, large-scale asset purchases and spending-based fiscal stimulus - in ameliorating the adverse consequences stemming...