We analyse a simplified New-Keynesian model with an unobserved aggregate cost-push shock in which firms and the central bank have different information about the shock. We consider a linear policy rule where a pure inflation targeting central bank decides how much to react to the shock given its...

Since 2013 the inflation rate in the euro area has fallen steadily, reaching all-time lows at the end of 2014. Market-based measures of inflation expectations (such as inflation swaps) have also declined to extremely low levels, which suggests increasing concern about the credibility of the ECB...

We propose a new way to compute market-based risk-adjusted measures of inflation expectations. Borrowing from the finance literature, we study the ex-post excess return on inflation swap contracts – the difference between the swap rate at a given maturity and the realized inflation rate over...

We build a general equilibrium model - along the lines of Williamson (2012) - where financial assets can be used as collateral in secured interbank markets to obtain reserves (central bank money). In this framework, frictions in the exchange process give rise to a liquidity premium for assets....

This paper builds a dynamic model of the information flow between partially informed financial institutions and a public agency. The financial institutions decide how to allocate their portfolio between a risk-free technology with a known payoff and a risky technology whose payoff is unknown....

Using Italian data from Twitter, we employ textual data and machine learning techniques to build new real-time measures of consumers' inflation expectations. First, we select some relevant keywords to identify tweets related to prices and expectations thereof. Second, we build a set of daily...