A procedure is outlined aiming at testing the bias due to omitted variables in vector autoregressions. The procedure consists first of filtering a vector of omitted variables and then testing the bias. The test does not rely on the availability of the omitted variables, and is based on a...

This work aims to verify whether there is an inflation bias in the Euro-area monetary policy. One verify the presence of a strategic repeated game between the European Central Bank and the market in setting actual and expected inflation and what the features of this game are. In particular, the...

Due to pressure from some lobbies, the government is unwilling to perform structural reforms. The probability of its re-election depends, however, on a positive business cycle. The central bank may create surprise deflation even though it maximizes the public's utility function and even if it...