Showing 1 - 10 of 108
This paper examine differences between risk-neutral and objective probability densities of future interest rates. The identification and quantification of these differences are important when risk-neutral densities (RNDs), such as option-implied RNDs, are used as indicators of actual beliefs of...
Persistent link: https://www.econbiz.de/10009635905
Traditional Taylor rules, which are estimated using a level specification linking the short-term interest rate to inflation and the output gap, are unstable when estimated on euro area data and forecast poorly out of sample. We present an alternative reaction function which takes the...
Persistent link: https://www.econbiz.de/10009635919
This paper employs stochastic simulations of a small structural rational expectations model to investigate the consequences of the zero bound on nominal interest rates. We find that if the economy is subject to stochastic shocks similar in magnitude to those experienced in the U.S. over the...
Persistent link: https://www.econbiz.de/10009635983
tightening, option-implied yield distributions are positively skewed, indicating that market participants attach higher … probabilities for sharp yield increases than for sharp decreases. Correspondingly, around loosening of the policy, implied yield … distributions are negatively skewed, suggesting that markets assign higher probabilities for sharp yield decreases than for …
Persistent link: https://www.econbiz.de/10009636538
This paper examines the feasibility of implementing Linear Quadratic Gaussian (LQG) Control in structural cointegrated VAR models and sheds some light on the two major problems generated by such implementation. The first aspect to be taken into account is the effect of the presence of unit roots...
Persistent link: https://www.econbiz.de/10009635883
for the existence of a bank lending channel. Finally, the estimation of the Structural-VECM highlights very rich dynamics …
Persistent link: https://www.econbiz.de/10009635913
along the euro area money market yield curve. A new multivariate unobserved components model is proposed allowing for both …. the second factor explains the transmission of volatility along the money market yield curve. We find evidence that most … market yield curve. …
Persistent link: https://www.econbiz.de/10009635972
handling of cointegration restrictions. This paper extends the Bayesian analysis of structural VARs to cover cointegrated … processes with an arbitrary number of cointegrating relations and general linear restrictions on the cointegration space. A …
Persistent link: https://www.econbiz.de/10009636519
In the paper we propose a new methodological approach to core in- flation estimation, based on a frequency domain …
Persistent link: https://www.econbiz.de/10009636528
Equilibrium correction models of the price level are often used to model inflation. Such models assume that the long-run markup of prices over costs is fixed, but this may not be true for the Euro area economy, which has undergone major structural reforms over the last 25 years. We allow for...
Persistent link: https://www.econbiz.de/10009636529