We propose a candidate solution to the imperfect exchange rate passthrough puzzle: habit persistence at the level of individual goods varieties. Deep habits generate a dynamic import demand function that leads to import price markup adjustments, independently of nominal pricing frictions. Augmenting a standard two-country model with deep habits, we obtain low exchange rate pass-through to impor...

We develop a two-country, dynamic general equilibrium model that links cross-country differences in net foreign asset and consumption dynamics to differences in discount factors and steady-state levels of productivity. We compare the results of the model to those of VARs for the G3 economies. We identify country-specific productivity shocks by assuming that productivity does not respond contemp...

When do financial markets help in predicting economic activity? With incomplete markets, the link between financial and real economy is statedependent and financial indicators may turn out to be useful particularly in forecasting "tail" macroeconomic events. We examine this conjecture by studying Bayesian predictive distributions for output growth and inflation in the US between 1983 and 2012, ...

Article history: Received 1 July 2010 Received in revised form 6 March 2013 Accepted 6 March 2013 Available online 16 March 2013 We investigate the transmission mechanism of monetary policy in China over the past decades with emphasis on the post-Asian crisis period. A factor-augmented VAR method is used to study the effectiveness of monetary policy instruments in stabilizing the Chinese econom...

Using a nonlinear structural VAR approach, we estimate the effects of exogenous monetary impulses in the presence of a zero lower bound constraint on nominal interest rates and examine the impact of such a constraint on the effectiveness of counter-cyclical monetary policies. We find that a binding zero bound on nominal interest rates can eliminate more than 50% of the effect of an exogenous mo...

Within the approaches that have been applied to assess the impact of public capital on economic growth, this paper estimates the dynamic effects of public infrastructures using a structural vector autoregressive (SVAR) methodology for the Spanish regions. From a methodological point of view, our work contains different innovative features with respect to the previous studies using VAR models. T...

Article history: Received 17 September 2014 Received in revised form 23 March 2015 Accepted 24 March 2015 Available online 31 March 2015 This paper investigates the dynamic effects of common macroeconomic shocks in shaping business cycle fluctuations in a group of Euro-area countries. In particular, by using the structural (near) VAR methodology, we investigate the effect of area-wide shocks, w...

The identification of a VAR requires differentiating between correlation and causation. This paper presents a method to deal with this problem. Graphical models, which provide a rigorous language to analyze the statistical and logical properties of causal relations, associate a particular set of vanishing partial correlations to every possible causal structure. The structural form is described ...

This paper complements existing cross-section and panel data analyses of the interaction of income and health outcomes by applying a cointegrating VAR model of income and health to time-series data for several Scandinavian countries. The results are consistent with previous crosssection and panel results, but also highlight the complexity and heterogeneity of the dynamic relationships that gene...

The accession of several Central and Eastern European Countries to Euroland is likely to be realised within the next years. Some studies aim at analysing the suitability of these Euro aspirants for currency union with EMU by evaluating the related macroeconomic costs. Still, they are prone to the Lucas critique since they do not consider endogeneity of the relevant criteria. We build on methodo...