How does contagion risk affect the business cycle? We find that the presence of contagion risk significantly alters the transmission of standard macroeconomic shocks. Relative to the first-best equilibrium, the contagion externality significantly reduces the response of output to a technology...

We estimate the euro area output gap by applying the Beveridge-Nelson decomposition based on a large Bayesian vector autoregression. Our approach incorporates multivariate information through the inclusion of a wide range of variables in the analysis and addresses data issues associated with the...

We decompose euro area sovereign bond yields into five distinct components: i) expected future short-term risk-free rates and a term premium, ii) default risk premium, iii) redenomination risk premium, iv) liquidity risk premium, and a v) segmentation (convenience) premium. Identification is...

This paper analyses the effects of the COVID-19 pandemic shock on small open economies in a monetary union with an application to the euro area. Accounting for a high degree of openness and a strong dependence on intra and extra union trade, we focus on the size and the direction of...

We document the impact of COVID-19 on frequently employed time series models, with a focus on euro area inflation. We show that for both single equation models (Phillips curves) and Vector Autoregressions (VARs) estimated parameters change notably with the pandemic. In a VAR, allowing the errors...

This paper develops Bayesian econometric methods for posterior inference in non-parametric mixed frequency VARs using additive regression trees. We argue that regression tree models are ideally suited for macroeconomic nowcasting in the face of extreme observations, for instance those produced...

We provide new evidence on price rigidity at the product level based on microdata underlying the Swiss consumer price index from 2008 to 2020. We find that the frequency of price changes has increased over the last decade, particularly among products where collection switched to online prices,...

This paper studies the macroeconomic consequences of the COVID-19 pandemic and makes a first step in adapting the central bank modelling apparatus to the new economic landscape. We augment the ECB-BASE model with the predictive dynamics of the SIR model in order to assess the interplay between...

This paper introduces the Consumer Expectations Survey (CES), a new online, high frequency panel survey of euro area consumers’ expectations and behaviour. The paper also investigates whether public perceptions about fiscal support measures introduced during the pandemic have influenced...