Evidence from monetary VARs for ten countries points towards an unfavorable trade-off between leaning against credit fluctuations and stabilizing real economic activity. Results are robust both across countries, and based on two alternative approaches, i.e. either (i) focusing on the impact of...

Building upon the insight that M1 velocity is the permanent component of nominal interest rates - see Benati (2020) - I propose a novel, and straightforward approach to estimating the natural rate of interest, which is conceptually related to Cochrane's (1994a) proposal to estimate the permanent...

We explore the welfare costs of inflation originating from lack of liquidity satiation for Weimar Republic's hyperinflation and three high-inflation countries. Towards the peak of Weimar's hyperinflation the costs are estimated to have been equal to nearly 20 per cent of income. For Israel,...

We explore the macroeconomic effects of a compression in the long-term bond yield spread within the context of the Great Recession of 2007-2009 via a time-varying parameter structural VAR model. We identify a 'pure' spread shock defined as a shock that leaves the policy rate unchanged, which...

We explore the long-run demand for M1 based on a dataset comprising 32 countries since 1851. We report six main findings: (1) Evidence of cointegration between velocity and the short rate is widespread. (2) Evidence of breaks or time-variation in cointegration relationships is weak to...

Chahrour and Jurado (2018) have shown that news and noise shocks are observationally equivalent when the econometrician only observes a fundamental process and agents' expectations about it. We show that the observational equivalence result no longer holds when the econometrician observes a...

We make two contributions to the literature exploring the role of sentiment in macroeconomic fluctuations: (I) Working with the theoretical MA representations of standard DSGE models, we show that several SVAR-based approaches to the identification of sentiment shocks are unreliable, as (e.g.)...

We make four contributions to the "news versus noise" literature: (I) We provide a new identification scheme which, in population, exactly recovers news and noise shocks. (II) We show that our scheme is not vulnerable to Chahrour and Jurado's (2018) criticism about the observational equivalence...

Based on either Monte Carlo simulations, or several examples based on actual data, I show that the ability of Johansen's tests to detect a cointegration relationship significantly deteriorates under two empirically plausible circumstances: (i ) when, in addition to a cointegration relationship,...

I explore whether time-series methods exploiting the long-run equilibrium properties of the housing market might have detected the disequilibrium in U.S. house prices which pre-dated the Great Recession as it was building up. Based on real-time data, I show that a VAR in levels identified as in...