Option prices provide valuable information on market expectations. This paper attempts to extract market expectations, as conveyed by an implied risk-neutral probability distribution, from option prices for the dollar-euro exchange rate. Returns` volatilities are inferred from observed and...

Classic models of fire-sales that emphasize liquidity-constrained natural buyers can-notfully account for the asset fire-sales during the Financial Crisis of 2008. I present a modelto demonstrate that fire-sales may happen even when there is a sizable pool of naturalbuyers and in the absence of...

In the aftermath of the global financial crisis, the issue of how best to identify speculative asset bubbles (in real-time) remains in flux. This owes to the difficulty of disentangling irrational investor exuberance from the rational response to lower risk based on price behavior alone. In...

This paper uses a set of routinely collected high-frequency data in low-income countries (LICs) to construct an aggregate and a comprehensive index of economic activity which could serve (i) as a measure of the direction of economic activity; and (ii) as a useful input in analyzing...

We propose a method for solving and estimating linear rational expectations models that exhibit indeterminacy and we provide step-by-step guidelines for implementing this method in the Matlab-based packages Dynare and Gensys. Our method redefines a subset of expectational errors as new...

This paper evaluates elements of a comprehensive reform of the Italian tax system. Reform options are guided by the principles of reducing complexity, broadening the tax base, and lowering marginal tax rates, especially the tax burden on labor income. The revenue and distributional implications...

The spread of COVID-19, containment measures, and general uncertainty led to a sharp reduction in activity in the first half of 2020. Europe was hit particularly hard—the economic contraction in 2020 is estimated to have been among the largest in the world—with potentially severe...

To assess the resilience of India’s corporate sector against COVID-19-related shocks, we conducted a series of stress tests using firm-level corporate balance sheet data. The results reveal a differential impact across sectors, with the most severe impact on contact-intensive services,...

This paper examines the links between global oil price movements and macroeconomic and financial developments in the GCC. Using a range of multivariate panel approaches, including a panel vector autoregression approach, it finds strong empirical evidence of feedback loops between oil price...

The paper offers a non-probabilistic framework for representation of uncertainty in the context of a simple linear-quadratic model of fiscal adjustment. Instead of treating model disturbances as random variables with known probability distributions, it is only assumed that they belong to some...