The empirical relationship among fiscal contractions, permanent improvement in public finances and short-run economic performance is examined using a sample of 14 European countries over the last three decades. The actual experience of policy-making has taught that only the adjustments that...

We evaluate the ability of market participants to anticipate monetary policy decisions in 14 countries. First, by looking at both the magnitude and volatility of changes in the money market rates we show that the days of policy meetings are special days for financial markets. Second, we find...