We briefly review the theoretical and empirical consequences of discretionary fiscal policy changes, after which we provide our own estimates for the EU countries. A fiscal expansion raises output and consumption and reduces the trade balance. Moreover, the stimulating effect of higher...

We estimate cross-border spillover effects of fiscal consolidation episodes on output, bilateral trade flows, interest rate, and the exchange rate, employing the new IMF action-based fiscal consolidation data. Results indicate a negative effect of foreign fiscal consolidation policies on...

We estimate spillover effects of a fiscal shock in one member country in the euro area on outputs of the rest of the members, using a Global Vector Autoregression (GVAR) model. We compare the effects of a domestic fiscal shock with those of a similar size area-wide shock expressed as a weighted...

Historical data for over hundred years and 14 countries is used to estimate the long-run effect of productivity on the real exchange rate. We find large variations in the productivity effect across four distinct monetary regimes in the sample period. Although the traditional Balassa-Samuelson...

How do population ageing shocks affect the long-run macroeconomic performance of an economy? To answer this question we build a general equilibrium overlapping generations model of a closed economy featuring endogenous factor prices. Finitely-lived individuals are endowed with perfect foresight...

We analyze the transmission of global financial crisis to business cycles in China and India. The pattern of business cycles in emerging Asian economies generally displays a low degree of synchronization with the OECD countries, which is consistent with the decoupling hypothesis. By contrast,...

Assessing exchange rate misalignment is not an easy task. With reference to the debate on the value of China’s currency, the renminbi (RMB), this article highlights a few challenges in properly assessing the extent of currency misalignment. The results derived from the fundamental equilibrium...

This paper reconsiders the role of monetary policy in Sweden’s strong recovery from the Great Depression. The Riksbank in the 1930s is sometimes seen as an example of a central bank that was relatively innovative in terms of the conduct of monetary policy. To consider this analytically, we...

This paper proposes an explanation of the shifts in the volatility of exchange rate returns that relies on standard present value exchange rate models. Agents are uncertain about the true data generating model and deal with the model uncertainty by making inference on the models and their...

We study the differences of currency misalignment estimates obtained from alternative datasets derived from two International Comparison Program (ICP) surveys. A decomposition exercise reveals that the year 2005 misalignment estimates are substantially affected by the ICP price revision....