Fiscal policymakers are expected to conduct countercyclical policies to mitigate cyclical fluctuations of output, but the assessment of cyclical conditions in real time is subject to considerable uncertainty. They face two types of risk: (i) launching discretionary measures to support or dampen...

We simulate the fiscal stimulus packages set up by the German government to allevi-ate the costs of the COVID-19 pandemic in a dynamic New Keynesian multi-sectorgeneral equilibrium model. We find that, cumulated over 2020-2022, output lossesrelative to steady state can be reduced by more than 4...

We use event study regressions to compare the impact of EU monetary versus fiscal policy announcements on government bond spreads of ten euro member countries. Our motivation is to evaluate which of the two players - the ECB or the EU fiscal level - has been more crucial for the stabilization of...

We present the estimated large-scale three-region DSGE model GEAR picturing Germany, the Euro Area and the Rest of the world. Compared to existing models of this type, GEAR incorporates a comprehensive fiscal block, involuntary unemployment and a complex international structure. We use the model...

Using an estimated large-scale New-Keynesian model, we assess welfare and business cycle consequences of a fiscal union within EMU. We differentiate between three different scenarios: public revenue equalisation, tax harmonisation and a centralised fiscal authority. Relative to the status quo,...

Between 1999 and the onset of the economic crisis in 2008 real exchange rates in Greece, Ireland, Italy, Portugal and Spain appreciated relative to the rest of the euro area. This divergence in competitiveness was reflected in the emergence of current account imbalances. Given that exchange rate...

Between 1999 and the onset of the economic crisis in 2008 real exchange rates in Greece, Ireland, Italy, Portugal and Spain appreciated relative to the rest of the euro area. This divergence in competitiveness was reflected in the emergence of current account imbalances. Given that exchange rate...

When is it optimal for a government to default on its legal repayment obligations? We answer this question for a small open economy with domestic production risk in which contracting frictions make it optimal for the government to finance itself by issuing non-contingent debt. We show that...

Budget-neutral tax wedge reductions rank high in the policy agenda of several EMU member states. Using a New Keynesian DSGE model of a monetary union with a complex labour market structure and a comprehensive public sector, we evaluate the macroeconomic and welfare effects of reducing the firms'...