PIIGS in the Euro Area. An Empirical DSGE Model

Albonico, Alice; Paccagnini, Alessia; Tirelli, Patrizio

doi:10.2139/ssrn.2746338

Cited by 16 publications

(1 citation statement)

References 50 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…This study focuses on the monetary policy discussions of the Group of Seven (G7) advanced economies. While this represents an increase in the number of regions covered compared to multicountry dynamic stochastic general equilibrium models, which typically cover approximately three regions (e.g., the global multicountry model proposed by Albonico et al (2019)), it does not comprehensively encompass global financial policies. In particular, central banks in emerging economies tend to take actions that deviate from recent macroeconomic and financial policy practices in advanced countries, such as raising interest rates for currency defense and exchange rate guidance (Engler et al, 2018).…”

Section: Introductionmentioning

confidence: 99%

Multicountry Time-Varying Taylor Rule: Modeling Unconventional Monetary Policies and Bond Premiums

Morita

2024

Int Adv Econ Res

View full text Add to dashboard Cite

In the post-financial-crisis era, advanced economies have increasingly adopted unconventional monetary policies such as zero interest rate policy, negative interest rate policy, forward guidance communication, and international coordination policies. Consequently, the traditional Taylor rule has lost some of its explanatory power. This analysis extends the Taylor rule from a single-country to a multicountry analysis using cross-country panel data, incorporating nonmacro factors and stationary correlation in the diffusion matrix for a dynamic factor analysis, specifically covering the Group of Seven countries with datasets compiled by Bloomberg L.P. for the period 1999–2022. This approach comprehensively models these unconventional monetary policies, demonstrating greater statistical validity than existing models. Notably, the model extracts the impact of zero interest rate policy and negative interest rate policy as nonmacro factors and presents the high correlation of residuals as indicative of international coordination among central banks. Additionally, by interpreting the discrepancy between the Taylor rule and actual rate as unintended interest rate fluctuations by central banks, the study posits that interest rates will eventually return to the central bank’s intended fair value. The model’s estimation errors could be treated akin to bond value factors in global risk premia.

show abstract

Section: Introductionmentioning

confidence: 99%