This paper analyses the reforms in the architecture of EMU since the eruption of the euro crisis in 2010. We describe major weaknesses in the original set-up of EMU, such as lack of fiscal discipline, diverging financial cycles and competitiveness positions, and a lack of crisis instruments....

The current account imbalances that are at the heart of the European sovereign debt crisis are often attributed to differences in price competitiveness. However, recent research suggests that domestic demand booms related to the financial cycle may have been more important. As this would have...

Recent studies find that short-term fluctuations in EMU have been symmetric. This finding leads to benign views on the functioning of EMU as an optimum currency area (OCA), that are difficult to reconcile with the sovereign debt crisis. We try to solve this puzzle by looking at medium-term...

This paper examines the extent to which large swings of sovereign yields in euro area countries during the sovereign debt crisis can be attributed to fundamentals. We focus on the inherent uncertainty in bond yield models, which is often overlooked in the literature. We show that the outcomes...

This paper investigates the role that Eurobonds could play in making EMU stable in the long run. We establish that EMU's budgetary problems are not only caused by lack of budgetary discipline, but also by the large and sudden fiscal deterioration during the financial crisis. This type of shock...