Structural vector autoregressions are used to analyse the relationship between real output and relative prices within the European Union (EU) and the United States. Relative price variability appears to be more important for adjustment within the EU than the United States, reflecting the lower...

We use the time series of shifts in U.S. Federal tax liabilities constructed by Romer and Romer to estimate tax multipliers. Differently from the single-equation approach adopted by Romer and Romer, our estimation strategy (a Var that includes output, government spending and revenues, inflation...

The view is widespread that there are just two options for the future of the Eurozone – either it is complemented by a fiscal union, or it will fall apart. In this paper, we discuss five possible elements of a fiscal union, of which three are in the centre of the current debate on fiscal union...

This paper shows how the richer frequency and variety of fiscal policy shocks available in an international sample can be analyzed recognizing the heterogeneity that exists across different countries. The main conclusion of our empirical analysis is that the question 'what is the fiscal policy...

We explore the dynamics of public debt in the presence of political shocks, in the form of shocks to preferences for public spending. Under commitment, optimal stabilization is obtained by combining an inflation target that is contingent on the political shock with a debt target that forces the...

This paper explores the implications of public investment for macroeconomic performance within a simple two-period policymaking model. We show that under the balanced-budget rule, the contribution of public investment to future output plays a key role in determining its effects on macroeconomic...

Germany is generally regarded as the nominal anchor for Europe. Its participation is the sine qua non of EMU. It has been the largest net contributor to EU finances, the leading proponent of greater economic and political union, and the leading example of the virtues of fiscal and monetary...