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Members Research Papers

Business Cycles in the Euro Area

JEL codes: 
E32
Keywords: 
european integration, Euro area, International Business Cycle, European monetary union
Version Date: 
Oct 2008
Author/s: 
Domenico Giannone
Abstract: 

This paper shows that the EMU has not affected historical characteristics of member countries' business cycles and their cross-correlations. Member countries which had similar levels of GDP per-capita in the seventies have also experienced similar business cycles since then and no significant change associated with the EMU can be detected.

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Growth in Euro Area Labour Quality

JEL codes: 
E24, J24, O47
Keywords: 
growth accounting, human capital, labour quality, total factor productivity
Version Date: 
Jun 2008
Abstract: 

Composition of the euro area workforce evolves over time and in response to changing labour market conditions. We construct an estimate of growth in euro area labour quality over the period 1983-2004 and show that labour quality has grown on average by 0.6% year-on-year over this time period. Labour quality growth was significantly higher in the early 1990s than in the 1980s.

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Fiscal Policy in Real Time

JEL codes: 
C23, E30, E62, H30, H60
Keywords: 
real-time data, Fiscal Policy, revision errors, endogenous threshold models
Version Date: 
May 2008
Author/s: 
Jacopo Cimadomo
Abstract: 

This paper argues that any assessment on the intentional stance of fiscal policy should be
based upon all the information available to policymakers at the time of fiscal planning. In
particular, real-time data on the discretionary fiscal policy "instrument", the structural
primary balance, should be used in the estimation of fiscal policy reaction functions. In

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Long Run and Short Run Dynamics in Italian Manufacturing Labour Productivity

Version Date: 
Mar 2008
Author/s: 
Tatiana Cesaroni
Abstract: 

This paper examines structural changes in the Italian manufacturing sector, focusing labour productivity in recent decades. To this end it distinguishes between trend movements in the data using a multivariate unobserved components model.

Evolving International Inflation Dynamics: Evidence from a Time-varying Dynamic Factor Model

JEL codes: 
E30, E52
Keywords: 
Factor model, Low inflation, monetary policy, time variation
Version Date: 
Feb 2008
Abstract: 

Several industrialised countries have had a similar inflation experience in the past 30 years, with inflation high and volatile in the 1970s and the 1980s but low and stable in the most recent period. We explore the dynamics of inflation in these countries via a time-varying factor model.

Euro Area Inflation Persistence in an Estimated Nonlinear DSGE Model

JEL codes: 
C11, C15, E31, E32, E52
Keywords: 
Bayesian estimation, DSGE models, inflation persistence, second order approximations, sequential Monte Carlo
Version Date: 
Jun 2007
Abstract: 

We estimate the approximate nonlinear solution of a small DSGE model on euro area data, using the conditional particle filter to compute the model likelihood. Our results are consistent with previous findings, based on simulated data, suggesting that this approach delivers sharper inference compared to the estimation of the linearised model.

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Forming Priors for DSGE Models (and How It Affects the Assessment of Nominal Rigidities)

JEL codes: 
C32, E30
Keywords: 
Bayesian Analysis, DSGE models, model comparisons, nominal rigidities, prior elicitation
Version Date: 
Jan 2007
Author/s: 
Marco Del Negro
Abstract: 

In Bayesian analysis of dynamic stochastic general equilibrium (DSGE) prior distributions for some of the taste-and-technology parameters can be obtained from microeconometric or pre-sample evidence, but it is difficult to elicit priors for the parameters that govern the law of motion of unobservable exogenous processes.

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Evaluating An Estimated New Keynesian Small Open Economy Model

JEL codes: 
C11, C53, E17
Keywords: 
Bayesian inference, DSGE model, DSGE-VAR model, open economy, DSGEVECM model
Version Date: 
Dec 2006
Author/s: 
Jesper Lindé, Mattias Villani
Abstract: 

This paper estimates and tests a new Keynesian small open economy model in the tradition of Christiano, Eichenbaum, and Evans (2005) and Smets and Wouters (2003) using Bayesian estimation techniques on Swedish data. To account for the switch to an inflation targeting regime in 1993 we allow for a discrete break in the central bank's instrument rule.

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Changing Patterns of Domestic and Cross-Border Fiscal Policy Multipliers in Europe and the US

JEL codes: 
E30, E61, E62
Keywords: 
Fiscal policy effectiveness, fiscal shocks, spillovers, factor-augmented VAR, Great Moderation
Version Date: 
Dec 2006
Author/s: 
Jacopo Cimadomo
Abstract: 

This paper documents time variation in domestic fiscal policy multipliers in Germany, the UK

The Phillips Curve Under State-Dependent Pricing

JEL codes: 
E31, E32
Keywords: 
inflation dynamics, Phillips curve, state-dependent pricing
Version Date: 
Oct 2006
Author/s: 
Hashmat Khan
Abstract: 

This article is related to the large recent literature on Phillips curves in sticky- price equilibrium models. It differs in allowing for the degree of price stickiness to be determined endogenously. A closed-form solution for short-term inflation is derived from the dynamic stochastic general equilibrium (DSGE) model with state-dependent pricing developed by Dotsey, King and Wolman.

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