The theory of optimal currency areas states that a single currency zone should have symmetry of shocks and structures across regions. Research on monetary union in Europe has either assumed these conditions to hold close enough not to cause problems, or has focussed on asymmetries in shocks. But...

Conventional wisdom has it that increasing price or exchange rate uncertainty will depress investment. Using the Dixit-Pindyck model, we find that there are situations where this does happen; and situations where it does not – i.e. increasing uncertainty leads to more investment. It depends...

I estimate the dynamic effects of respectively traditional interest rate innovations and unconventional monetary policy actions on the Euro area economy. The results show that the Eurosystem can stimulate the economy beyond the policy rate by increasing the size of its balance sheet. The...

Shocks to bank lending, risk-taking and securitization activities that are orthogonal to real economy and monetary policy innovations account for more than 30 percent of U.S. output variation. The dynamic effects, however, depend on the type of shock. Expansionary securitization shocks lead to a...

This Paper uses a simple VAR for the industrialized world (aggregate of 17 countries), the US and the euro area to analyse the underlying shocks of the recent slowdown, i.e. supply, demand, monetary policy and oil price shocks. The results of two identification strategies are compared. One is...

If private sector agents hold rational expectations, they will predict any future policy switches. Discounting the announced optimal policies, if they are not credible, will lead to a response which deprives the government of any incentive to renege on previous announcements and of the benefits...

We study the effects of Central Bank transparency on inflation and the output gap. We thus first identify a small analytical model, which concludes that transparency affects the variability of inflation and output and not their average levels. Then we examine whether this conjecture holds...

The early 1990s marked a distinction between the EMS as a vehicle for creating monetary stability and the EMS as a vehicle for moving towards monetary union. We model that distinction by contrasting policies generated by preference transfers from the lead country (to create the EMS discipline of...

This paper examines and compares the effectiveness of hedging and buffer-stock strategies for stabilizing the revenues of individual producers who face different supply conditions in a market with uncertainty about prices and output. The results are obtained in a model-free framework, with...

In this paper we evaluate the deterioration in the European sacrifice ratio implied (both in terms of inflation and unemployment) by the fact that labour markets are structurally different and there is very little labour mobility between the European Union countries. We also consider a wage...