In this paper we suggest that Eurozone countries face a policy trade-off among: 1) a common rule imposing co-movements in fiscal policy; 2) financial stability; and 3) financial integration. We provide empirical evidence documenting the existence of such a trade-off in the period characterized...

We use the demise of silver-based standards in the 19th century to explore price dynamics when a commodity-based money ceases to function as a global unit of account. We develop a general equilibrium model of the global economy with gold and silver money. Calibration of the model shows that...

In the wake of the euro area crisis, the debate on instruments to deepen economic integration among its members has intensified, among others putting forward a fiscal stabilization capacity for EMU members. Contributions made so far to further this idea have mostly concentrated on the...

Fiscal federalism may not be a panacea in a monetary union if it does not address the non-cooperative behaviour between fiscal policymakers. To prove this, we assess the relative merits of a fiscal federalism scheme in a monetary union and intergovernmental fiscal cooperation without such a...

This paper studies the design of the policy mix in a monetary union, that is, the institutional arrangement specifying the relationships between the various policymakers present in the union and the extent of their capacity of action. It is assumed that policymakers do not cooperate. Detailing...

We assess the role of national fiscal policies, as automatic stabilizers, within a monetary union. We use a two-country New Keynesian DGE model which incorporates non-Ricardian consumers (as in Gali et al. 2004) and a home bias in the composition of national consumption bundles. We find that...

Labor mobility is commonly taken as a property of an optimal currency area. But how does that property affect the outcome of fiscal policies? In our model, we show that perfect (costless) labour mobility is not necessarily welfare improving, since it prevents the national fiscal authorities from...

This paper provides an update on the exchange rate pass-through (ERPT) estimates for 12 Euro area (EA) countries. First, based on quarterly data over the 1990-2012 period, our study does not find a significant heterogeneity in the degree of pass-through across the monetary union members, in...

This paper examines the impact of exchange rate uncertainty on different components of portfolio flows, namely equity and bond flows, as well as the dynamic linkages between exchange rate volatility and the variability of these two types of flows. Specifically, a bivariate GARCH-BEKK-in-mean...

This paper investigates the effects of equity and bond portfolio inflows on exchange rate volatility, using monthly bilateral data for the US vis-a-vis eight Asian developing and emerging countries (India, Indonesia, South Korea, Pakistan, Hong Kong, Thailand, the Philippines, and Taiwan) over...