This paper examines the responses of private consumption, residential investment, and business investment in 11 EU countries, Japan, and the United States to shocks in housing and equity prices. The effects are assessed with a Structural Vector Auto Regressive (SVAR) model, and four key findings...

The Greek bail-out was highly controversial. An oft-heard assessment is that i) the bail-out was a mistake, ii) the political haggling over it was irrational and iii) the bail-out will create a moral hazard problem. Contrary to this view, our analysis suggests that, given EMU's present...

We provide evidence on the fit of the hybrid New Keynesian Phillips curve for selected euro zone countries, the US and the UK. Instead of imposing rational expectations and estimating the Phillips curve by the Generalized Method of Moments, we follow Roberts (1997) and Adam and Padula (2003) and...

The paper discusses key elements of optimal central bank design and applies its findings to the Eurosystem. A particular focus is on the size of monetary policy committees, the degree of centralization, and the representation of relative economic size in the voting rights of regional (or...

This paper analyzes the effectiveness of the tax and transfer systems in the European Union and the US to act as an automatic stabilizer in the current economic crisis. We find that automatic stabilizers absorb 38 per cent of a proportional income shock in the EU, compared to 32 per cent in the...

The extent of government deficits and debt has been one of the most debated issues in recent years. However, much less has been contributed about their dynamics. Yet, the issue of entering into and exiting from excessive deficits is critical in the Economic and Monetary Union since the Stability...

This paper explores the role that the imperfect knowledge of the structure of the economy plays in the uncertainty surrounding the effects of rule-based monetary policy on unemployment dynamics in the euro area and the US. We employ a Bayesian model averaging procedure on a wide range of models...

The foreign debts of the European countries are at the core of the current crises. Generally, the crises are attributed to government budget deficits in excess of the values stated in the Stability and Growth Pact (SGP)/Maastricht treaty. Proposals for reform generally involve increasing the...

The paper analyses theoretically what role fiscal councils could play and surveys empirically the activities of existing councils. Case studies of the Swedish Fiscal Policy Council and the UK Office for Budget Responsibility are done. It is concluded that fiscal councils should be advisory,...