Rational expectations has been the dominant way to model expectations, but the literature has quickly moved to a more realistic assumption of boundedly rational learning where agents are assumed to use only a limited set of information to form their expectations. A standard assumption is that...

The model presented here is an estimated medium-scale New Multi-Country Model (NMCM) which covers the five largest euro area countries and is used for forecasting and scenario analysis at the European Central Bank. The model has a tight theoretical structure which allows for non-unitary...

This paper assesses if a Bayesian VAR with a Dornbusch prior outperforms the random walk model in predicting real exchange rates. Our main contributions are twofold. First, from a methodological point of view we apply an innovative framework to estimate structural Bayesian VAR models. Second, we...