This paper offers a straightforward and descriptive contribution to the recent and busy debate on fiscal discipline made popular by a seminal paper by Reinhart and Rogoff (2010) after policymakers have sought foundation and justification of a policy known as austerity measures following the...

A recent recovery in the United Kingdom comes after a program of austerity measures announced by the incoming coalition government in 2010. Can the recent pick up in economic activity be attributed to this controversial fiscal policy? This paper uses an empirical approach to test the causal...

This paper explores the relationship between inequality and growth in the context of a unified empirical approach suggested by the theoretical model of Galor and Moav (2004). Based on the model’s prediction, we construct a measure of human capital-to-physical capital ratio in order to...

The performance of a countercyclical reserve requirement rule is studied in a dynamic stochastic model of a small open economy with financial frictions, imperfect capital mobility, a managed float regime, and sterilized foreign exchange market intervention. Bank funding sources, domestic and...

In recent literature on monetary policy, it has been argued that a sensible policy rule should be able to induce learnability of the fundamental equilibrium: if private agents update their beliefs over time using adaptive learning technques, they should be able to converge towards rationality....

We present an analysis of the e¤ects of foreign aid on economic development when the quality of governance may be compromised by corruption. The analysis is based on a dynamic general equilibrium model in which growth is driven by capital accumulation and public policy is administered by...

The Calvo contract pricing mechanism has become the most widely accepted microfoundation to the NK Phillips curve but unfortunately predicts that all firms in the economy face the same probability of price change. To better explain the stylized fact this paper relaxes the homogeneous firm...

In this paper we propose a novel methodology for forecasting variance convariance matrices (VCM) using kernel estimates. While the popular Riskmetrics methodology can be seen as a special case of our methodology, the generalisation is significant as it allows the researcher to use a number of...

Time series analysis for the Euro Area requires the availability of sufficiently long historical data series, but the appropriate construction methodology has received little attention. The benchmark dataset, developed by the European Central Bank for use in its Area Wide Model (AWM), is based...

Incorporating survey forecasts to a forecast-augmented Hodrick-Prescott filter, we evidence a considerable improvement to the reliability of US output-gap estimation in realtime. Odds of extracting wrong signals of output-gap estimates are found to reduce by almost a half, and the magnitude of...