Skip to main content

Research Repository

Advanced Search

All Outputs (12)

Debt targets and fiscal consolidation in a Euro Area HANK model (2025)
Journal Article
Chen, X., Lazarakis, S., & Varthalitis, P. (in press). Debt targets and fiscal consolidation in a Euro Area HANK model. Quantitative Economics. https://onlinelibrary.wiley.com/journal/17597331?

This paper develops a world economy HANK model for the Euro Area (EA) Core and Periphery, which captures key features of EA cross- and within-country heterogeneity, to study debt target reforms. We show that fiscal consolidation under the current EA... Read More about Debt targets and fiscal consolidation in a Euro Area HANK model.

Evaluating Fiscal Policy Reforms Using the Fiscal Frontier (2023)
Journal Article
Chen, X., Leith, C., & Ricci, M. (2023). Evaluating Fiscal Policy Reforms Using the Fiscal Frontier. Journal of Economic Dynamics and Control, 155, 104733. https://doi.org/10.1016/j.jedc.2023.104733

We develop a Fiscal Frontier which traces out the maximum government debt level that can be sustained at a given welfare cost. Through duality, the intertemporal policy mix underpinning the Frontier mirrors standard Ramsey policy and de nes an upper... Read More about Evaluating Fiscal Policy Reforms Using the Fiscal Frontier.

Evaluating Fiscal Policy Reforms using the Fiscal Frontier (2023)
Preprint / Working Paper
Chen, X., Leith, C., & Ricci, M. (2023). Evaluating Fiscal Policy Reforms using the Fiscal Frontier. JRC Publications Repository. https://publications.jrc.ec.europa.eu/repository/handle/JRC132538

We develop a Fiscal Frontier which traces out the maximum government debt level that can be sustained at a given welfare cost.
Through duality, the intertemporal policy mix underpinning the Frontier mirrors standard Ramsey policy and defines an uppe... Read More about Evaluating Fiscal Policy Reforms using the Fiscal Frontier.

Strategic Interactions in U.S. Monetary and Fiscal Policies (2022)
Journal Article
Chen, X., Leeper, E. M., & Leith, C. (2022). Strategic Interactions in U.S. Monetary and Fiscal Policies. Quantitative Economics, 13(2), 593-628. https://doi.org/10.3982/qe1678

We estimate a model in which fiscal and monetary policy obey the targeting rulesof distinct policy authorities, with potentially different objective functions. Wefind: (1) Time-consistent policy fits U.S. time series at least as well as instrument-ru... Read More about Strategic Interactions in U.S. Monetary and Fiscal Policies.

How Optimal is US Monetary Policy? (2017)
Journal Article
Chen, X., Kirsanova, T., & Leith, C. (2017). How Optimal is US Monetary Policy?. Journal of Monetary Economics, 92, 96-111. https://doi.org/10.1016/j.jmoneco.2017.09.009

Using a small-scale microfounded DSGE model with Markov switching in shock variances and policy parameters, we show that the data-preferred description of US monetary policy is a time-consistent targeting rule with a marked increase in conservatism a... Read More about How Optimal is US Monetary Policy?.

An empirical assessment of Optimal Monetary Policy in the Euro area (2017)
Journal Article
Chen, X., Kirsanova, T., & Leith, C. (2017). An empirical assessment of Optimal Monetary Policy in the Euro area. European Economic Review, 100, 95-115. https://doi.org/10.1016/j.euroecorev.2017.07.012

We estimate a New Keynesian DSGE model for the Euro area under alternative descriptions of monetary policy (discretion, commitment or a simple rule) after allowing for Markov switching in policy-maker preferences and shock volatilities. This reveals... Read More about An empirical assessment of Optimal Monetary Policy in the Euro area.

Measuring the dollar-euro permanent equilibrium exchange rate using the unobserved components model (2015)
Journal Article
Chen, X., & MacDonald, R. (2015). Measuring the dollar-euro permanent equilibrium exchange rate using the unobserved components model. Journal of International Money and Finance, 53, 20-35. https://doi.org/10.1016/j.jimonfin.2014.12.008

This paper employs an unobserved component model that incorporates a set of economic fundamentals to obtain the Euro–Dollar permanent equilibrium exchange rates (PEER) for the period 1975Q1 to 2008Q4. The results show that for most of the sample peri... Read More about Measuring the dollar-euro permanent equilibrium exchange rate using the unobserved components model.

Asset Prices, Credit and Business Cycles. (2012)
Journal Article
Chen, X., Kontonikas, A., & Montagnoli, A. (2012). Asset Prices, Credit and Business Cycles. Economics Letters, 117(3), 857-861. https://doi.org/10.1016/j.econlet.2012.08.040

This paper uses the multivariate unobserved components model with phase shifts to analyse the interaction of interest rates, output, asset prices and credit in the US. We find close linkages amongst cyclical fluctuations in the variables.

Realized and Optimal Monetary Policy Rules in an Estimated Markov-Switching DSGE Model of the United Kingdom. (2012)
Journal Article
Chen, X., & MacDonald, R. (2012). Realized and Optimal Monetary Policy Rules in an Estimated Markov-Switching DSGE Model of the United Kingdom. Journal of Money, Credit and Banking, 44(6), 1091-1116. https://doi.org/10.1111/j.1538-4616.2012.00524.x

This paper investigates underlying changes in the UK economy over the past 35 years using a small open economy dynamic stochastic general equilibrium model. Using Bayesian analysis, we find UK monetary policy, nominal price rigidity and exogenous sho... Read More about Realized and Optimal Monetary Policy Rules in an Estimated Markov-Switching DSGE Model of the United Kingdom..

Measuring the Euro Area Output Gap using Multivariate Unobserved Components Model Containing Phase Shifts. (2011)
Journal Article
Chen, X., & Mills, T. C. (2012). Measuring the Euro Area Output Gap using Multivariate Unobserved Components Model Containing Phase Shifts. Empirical Economics, 43(2), 671-692. https://doi.org/10.1007/s00181-011-0495-7

Several recent studies have used multivariate unobserved components models to identify the output gap and the non-accelerating inflation rate of unemployment. A key assumption of these models is that one common cycle component, such as the output gap... Read More about Measuring the Euro Area Output Gap using Multivariate Unobserved Components Model Containing Phase Shifts..

Evaluating growth cycle synchronisation in the EU. (2008)
Journal Article
Chen, X., & Mills, T. C. (2009). Evaluating growth cycle synchronisation in the EU. Economic Modelling, 26(2), 342-351. https://doi.org/10.1016/j.econmod.2008.07.017

This paper provides an insight into the level of economic and monetary integration in Europe by analysing the degree of growth cycle synchronisation between seven European countries over the past thirty years. Two univariate trend-cycle decomposition... Read More about Evaluating growth cycle synchronisation in the EU..