Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/298307 
Year of Publication: 
2023
Series/Report no.: 
NBB Working Paper No. 433
Publisher: 
National Bank of Belgium, Brussels
Abstract: 
We estimate a DSGE model with Preferences Over Safe Assets (POSA) on Euro Area macroeconomic data and interest rate expectations measures. The model with POSA has much better empirical fit than the otherwise identical model without, especially once interest rate expectations are added to the data set. Including measures interest rate expectations strongly improves the model forecast of GDP and its components, with the best forecast delivered by the POSA model. Finally, with POSA, ECB forward guidance increased GDP and inflation by 1.9 % and 0.1 percentage points by 2019Q4, respectively, much less than without POSA.
Subjects: 
DSGE estimation with interest rate expectations in the data set
forecasting
forward guidance
preferences over safe assets
JEL: 
E37
E43
E47
E52
Document Type: 
Working Paper

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