In this paper we analyse the sensitivity of the macroeconomic outcomes under the Network for Greening the Financial System's (NGFS's) Phase III net-zero and delayed transition scenarios to different monetary and fiscal policy settings. In doing so, we provide a rare application of the NGFS...

This paper takes stock of the ECB's macroeconometric modelling strategy by focusing on the models and applications used in the Forecasting and Policy Modelling Division. We focus on the guiding principles underpinning the current portfolio of the main macroeconomic models and illustrate how they...

We analyse the interaction between monetary and macroprudential policies in the euro area by means of a two-country DSGE model with financial frictions and cross-border spillover effects. We calibrate the model for the four largest euro area countries (i.e. Germany, France, Italy, and Spain),...

This paper introduces ECB-(RE)BASE as the model-consistent, or rational expectation version of the ECB-BASE model. It brings new analytical capabilities to consider varying degrees of heterogeneity in expectation formation across the agents of the model. While the original version of ECB-BASE...

In the presence of rigid prices, movements in the exchange rate help to absorb external shocks and to reduce changes in net exports. However, they also affect firms’ competitiveness, marginal costs, and labor demand. In countries where labor market institutions hinder wage adjustment (for...

We assess, through VAR evidence, the effects of monetary policy on banks' risk exposure and find the presence of a risk-taking channel. A model combining fragile banks prone to risk mis-incentives and credit constrained firms, whose collateral fluctuations generate a balance sheet channel, is...

We study alternative scenarios for exiting the post-crisis fiscal and monetary accommodation using a macromodel where banks choose their capital structure and are subject to runs. Under a Taylor rule, the post-crisis interest rate hits the zero lower bound (ZLB) and remains there for several...

We assess the effects of monetary policy on bank risk to verify the existence of a risk-taking channel - monetary expansions inducing banks to assume more risk. We first present VAR evidence confirming that this channel exists and tends to concentrate on the bank funding side. Then, to...

This paper introduces ECB-(RE)BASE as the model-consistent, or rational expectation version of the ECB-BASE model. It brings new analytical capabilities to consider varying degrees of heterogeneity in expectation formation across the agents of the model. While the original version of ECB-BASE...