The analysis of the macroeconomic impact of fiscal policies in the euro area has been traditionally limited by the absence of quarterly fiscal data. To overcome this problem, we provide two new databases in this paper. Firstly, we construct a quarterly database of euro area fiscal variables for...

In this paper we study the link between elections, fiscal policy and aggregate fluctuations. The set-up is a stylized dynamic stochastic general equilibrium model incorporating both technology and political re-election shocks. The later are incorporated via a two-party model with elections. The...

When monetary and fiscal policy are conducted as in the euro area, output, inflation, and government bond default premia are indeterminate according to a standard general equilibrium model with sticky prices extended to include defaultable public debt. With sunspots, the model mimics the recent...

In this paper we examine the sustainability of euro area public finances against the backdrop of population ageing. We critically assess the widely used projections of the Working Group on Ageing Populations (AWG) of the EU's Economic Policy Committee and argue that ageing costs may be higher...

We introduce a non-linear model to study the adjustment of fiscal policy variables in Greece, Ireland, Portugal and Spain over the last 50 years, based on endogenously estimated budget deficit-to-GDP thresholds, which vary with fiscal disequilibria, the economic cycle and financial market...

We assess the effects on trade balance of a temporary fiscal devaluation enacted by Spain or Portugal by simulating EAGLE, a large-scale multi-country dynamic general equilibrium model of the euro area. Social contributions paid by firms are reduced by 1 percent of GDP for four years and are...

This paper explores the potential effectiveness of the ECB's Outright Monetary Transaction (OMT) program in safeguarding an appropriate monetary policy transmission. Since the program aims at manipulating bank lending rates by conducting sovereign bond purchases on secondary markets, a stable...

It is widely debated whether a monetary union has to be accompanied by a fiscal transfer scheme to accommodate asymmetric shocks. We build a model of a monetary union with a central bank and two heterogeneous countries that are linked by a fiscal transfer scheme with repercussions on monetary...

Both Japan and parts of the European Monetary Union have experienced boom and bust in stock and real estate markets, which have been followed by a lasting crisis. The paper analyses the role of a high degree of regional heterogeneity for public debt and monetary policy in the context of crisis....