This study finds that equity returns in the banking sector in the wake of the Great Recession and the European sovereign debt crisis have been driven mainly by weak growth prospects and heightened sovereign risk and to a lesser extent, by deteriorating funding conditions and investor sentiment....

This paper looks at theoretical and empirical issues associated with the operation of fiscal stabilizers within an economy. It argues that such stabilizers operate most effectively at a national, rather than local, level. As differing cycles across regions tend to offset each other for the...

The paper considers the issue of whether a supranational fiscal policy in Europe is needed, and, if so, what responsibilities it should undertake. The literature on endogenous growth and the principle of subsidiarity suggest that such a policy should be limited to externalities or economies of...

We study the smoothing impact of fiscal stabilizers (proxied by government expenditures or revenues) on business cycle volatility for a panel of EU countries in the period 1970-99. The results show that the business cycle volatility smoothing effect of fiscal stabilizers may revert at high...

We use event study methods to compare the market reaction to U.S. and EU-wide stress tests performed from 2009 to 2013. Typically, stress tests have a positive impact on stressed banks’ returns. While the 2009 U.S. stress test had a large positive outcome, the impact of subsequent U.S....

An important question in the process of European integration concerns the best institutional level for stabilization policies. The theory of fiscal federalism gives criteria for evaluating if fiscal stabilization policies should take place on a centralized or on a decentralized level. This paper...

In the last decade, over half of the EU countries in the euro area or with currencies pegged to the euro were hit by large risk premium shocks. Previous papers have focused on the impact of these shocks on demand. This paper, by contrast, focuses on the impact on supply. We show that risk...

This paper uses a global input-output framework to quantify US and EU demand spillovers and the elasticity of world trade to GDP during the global recession of 2008-2009. We find that 20-30 percent of the decline in the US and EU demand was borne by foreign countries, with NAFTA, Emerging...