The potential mutation of the Sub-Prime banking crisis into a sovereign debt one in Euro area countries is investigated. After reviewing the criteria used to measure the debt vulnerability, the balance sheet approach (BSA) is presented in order to illustrate the potential connections between...

The paper compares the boom-and-bust cycles in Japan and Europe with respect to the reasons for excessive booms, the characteristics of the crises, and the (potential) effects of the crisis therapies. As in Japan the consequence of expansionary monetary and fiscal policies is the hysteresis of...

Greece has reached a point where, under any plausible macroeconomic scenario, public debt will continue growing faster than GDP. Fiscal consolidation alone cannot close the solvency gap. A substantial reduction in the stock of debt is needed. Even post-debt restructuring, there is no guarantee...

We test the hypothesis that the government bond markets in the Eurozone are more fragile and more susceptible to self-fulfilling liquidity crises than in stand-alone countries. We find evidence that a significant part of the surge in the spreads of the PIGS countries in the Eurozone during...

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...

This paper studies theoretically and empirically why and how labor policies may reduce productivity and employment in order to stabilize labor incomes and redistribute resources. It proposes a specific stylized model where the tradeoffs facing labor policies are influenced by structural factors,...

Did austerity cause Brexit? This paper shows that the rise of popular support for the UK Independence Party (UKIP), as the single most important correlate of the subsequent Leave vote in the 2016 European Union (EU) referendum, along with broader measures of political dissatisfaction, are...

Using a rich data set on the EU regions, we analyze the relevance of two possible determinants of a region's resilience to shocks, the degree of urbanization and specialization. We take the Great Recession, the economic and financial crisis that started in 2008, as our shock and then analyze how...