We seek to quantify the impact on euro area GDP of the European Economic Recovery Plan (EERP) enacted in response to the financial crisis of 2008-09. To do so, we estimate an extended version of the ECB’s New Area-Wide Model with a richly specified fiscal sector. The estimation results point...

How much did fiscal policy contribute to euro area real GDP growth during the Great Recession? We estimate that discretionary fiscal measures have increased annualized quarterly real GDP growth during the crisis by up to 1.6 percentage points. We obtain our result by using an extended version of...

In this paper, we examine the macroeconomic effects of alternative fiscal consolidation policies in the New Area-Wide Model (NAWM), a two-country open-economy model of the euro area developed at the European Central Bank (cf. Coenen et al., 2007). We model fiscal consolidation as a permanent...

In this paper, we employ a calibrated two-country version of the New Area-Wide Model (NAWM) currently under development at the European Central Bank to examine the potential benefits and spillovers of reducing labour-market distortions caused by euro area tax structures. Our analysis shows that...

In this paper, we revisit the effects of government spending shocks on private consumption within an estimated New-Keynesian DSGE model of the euro area featuring non-Ricardian households. Employing Bayesian inference methods, we show that the presence of non-Ricardian households is in general...

Labour Supply and Incentives to Work in Europe highlights recent developments in the labour supply in Europe and gives a detailed assessment of their link with economic policies and labour market institutions. Despite major changes in European labour supply during the past few decades, the...

How should monetary policy respond to changes in financial conditions? In this paper we consider a simple model where firms are subject to idiosyncratic shocks which may force them to default on their debt. Firms’ assets and liabilities are denominated in nominal terms and predetermined when...

This paper studies the optimal choice of exchange rate regimes between two large currency areas. It provides a positive and normative analysis of alternative monetary policy rules in a model with sticky prices, monopolistic competition, and frictions in the processes of capital accumulation and...