We construct and estimate the term structure implications of a small DSGE model with nominal rigidities in which the laws of motion of the structural shocks are subject to stochastic regime shifts. We demonstrate that, to a second order approximation, switching regimes generate time-varying risk...

Phenomena such as the Great Moderation have increased the attention of macroeconomists towards models where shock processes are not (log-)normal. This paper studies a class of discrete-time rational expectations models where the variance of exogenous innovations is subject to stochastic regime...

We estimate the approximate nonlinear solution of a small DSGE model on euro area data, using the conditional particle filter to compute the model likelihood. Our results are consistent with previous findings, based on simulated data, suggesting that this approach delivers sharper inference...

This paper extends Svensson (1994) ?simplest test?of in?ation target credibility inside a Bayesian econometric framework. We apply this approach to the initial years of the Eurosystem and obtain various estimates of ECB?s monetary policy credibility. Overall, our empirical evidence is robust to...

This work deals with multivariate stochastic volatility models that account for time-varying stochastic correlation between the observable variables. We focus on the bivariate models. A contribution of the work is to introduce Beta and Gamma autoregressive processes for modelling the correlation...

We employ a money-based early warning model in order to analyse the risk of a low inflation regime in the euro area, Japan and the US. The model specification allows for three different inflation regimes: Low, Medium and High inflation, while state transition probabilities vary over time as a...

We employ a money-based early warning model in order to analyse the risk of a low inflation regime in the Euro Area, Japan and the US. The model specification allows for three different inflation regimes: "Low", "Medium" and "High" inflation, while state transition probabilities vary over time...