Guest Contribution: “Time-varying Models for Monetary Policy and Financial Stability”

Today, we are pleased to present a guest contribution written by Laurent Ferrara (Adjunct Professor of Economics, University Paris Nanterre, France). The views expressed here are those solely of the author.

This is the title of a Euro Area Business Cycle Network (EABCN) – Pierre Werner Chair conference organized last week at the European University Institute in Florence (Italy) by Fabio Canova (Norwegian Business School and EUI), Massimiliano Marcellino (Bocconi Univ.), Barbara Rossi (ICREA-Univ. Pompeu Fabra, BGSE and CREI) and Laurent Ferrara (Banque de France).

The Global Financial Crisis has led to dramatic changes in the global economy with strong reactions from policy-makers. Consequently, there is a need for macroeconomic models allowing for more flexibility in standard economic relationships in order to account for large shifts. Against this background, there is a burgeoning literature on models with time varying parameters.

Invited speakers were Wouter Den Haan (LSE), Jesper Lindé (Riksbank), Junior Maih (Norges Bank), and Dan Waggoner (Atlanta FED) who presented recent approaches enabling to integrate non-linearities in macroeconomic models and to estimate Impulse Response Functions accordingly. Overall the papers presented during the regular and poster sessions covered a broad range of topics related to econometric models with parameter time-variation. A special emphasis was on methodological, theoretical and empirical aspects and on their relevance for economic policy making, in particular for monetary policy and financial stability. For example, topics of the conference included time variation in large models, DSGE models with time-varying parameters, economic policy evaluation in unstable environments or assessing the effects of unconventional monetary policy at the Zero Lower Bound.

The complete program is available here.

This post written by Laurent Ferrara.

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