In this paper I focus on two specific hazard areas in the transition from Stage Two to Stage Three of European economic and monetary union (EMU), as well as on some key problems of Stage Three that EMU's monetary and fiscal structures appear ill-prepared to handle. The transitional hazards are...

How will countries handle idiosyncratic national macroeconomic shocks under the European single currency? The ways in which European countries now react to internally asymmetric shocks provide a better forecast than do the regional response pattern of the United States. In this paper we compare...

It has been widely remarked that US import prices have not fully reflected movements in the exchange rate. This paper begins with an investigation of the actual extent of "pricing to market" by foreign suppliers. It shows that pricing to market is a real phenomenon, but not universal; in...

In recent years the world economy has been subject to large and unsyncronized changes in fiscal policies, high and volatile real rates of tnterest, large fluctuations in real exchange rates, and significant variations in private-sector spending. This paper reviews some of the key facts...

This paper illustrates the importance of the fiscal framework for monetary analysis by discussing three separate issues. I begin by examining how the fiscal framework changes the macroeconomic equilibrium associated with different steady state rates of money growth. This includes a summary of...

We discuss the main fiscal policy issues in the Eurozone. Our goal is pedagogical: we do not make any new proposal, but try to represent fairly the various sides of the debate. We focus on two issues that are at the core of the current debate. The first is that, right from the start, the...

The paper compares migration policy and welfare state generosity between America and Europe. There is more selective skill-based migration policy in the US compared to the European Union. Policy coordination among states within the federal system on migration, taxes, and social benefits among...

We introduce the real exchange rate volatility curve as a useful device to understand the role of price stickiness in accounting for deviations from the Law of One Price at the sector level. In the presence of both nominal and real shocks, the theory predicts that the real exchange rate...

The paper provides and empirical characterization of fiscal policy in the euro area and in a group of twenty-two OECD economies over the period from 1970 until 2007. Using the cyclically-adjusted fiscal balance we document that policy in the euro area has been mildly pro-cyclical. The adoption...

We consider the effect of excluding government investment from the deficit subject to the limits of the European Stability and Growth Pact. In the model we consider, residents of a given country discount future costs and benefits of government spending more than efficiency would dictate, because...