Using a DSGE model calibrated to the euro area, we analyze the international effects of afiscal devaluation (FD) implemented as a revenue-neutral shift from employer's socialcontributions to the Value Added Tax. We find that a FD in 'Southern European countries' has a strong positive effect on...

This paper studies the dynamics of external accounts during 278 economic recession events in the past 60 years and sheds light on key factors that shape these patterns. Economic recessions trigger highly-persistent increases in the current account, driven by an initial, sharp decline in...

Using a database of up to 62 variables for 196 countries over 57 years, a hyperinflation cycle has been characterized to propose a broader setting of stylized facts. Beyond the usual facts, the findings in this paper contribute to the literature of modern hyperinflations in that these cycles...

The aim of this paper is to assess the effectiveness of risk sharing mechanisms in the euro area and whether a supranational fiscal risk sharing mechanism could insure countries against very severe downturns. Using an unbalanced panel of 15 euro area countries over the period 1979-2010, the...

We study the process of external adjustment to large terms-of-trade level shifts-identified with a Markov-switching approach-for a large set of countries during the period 1960-2015. We find that adjustment to these shocks is relatively fast. Current accounts experience, on average, a...

This paper explores the effect of news shocks on the current account and other macroeconomic variables using worldwide giant oil discoveries as a directly observable measure of news shocks about future output - the delay between a discovery and production is on average 4 to 6 years. We first...

The euro area periphery countries and the Baltic countries, which had large current account deficits in the run-up to the crisis, needed adjustment of relative prices to achieve both internal and external balances. Thus far, tangible progress has been made through lower wages and/or higher...

In 2007, countries in the Euro periphery were enjoying stable growth, low deficits, and low spreads. Then the financial crisis erupted and pushed them into deep recessions, raising their deficits and debt levels. By 2010,they were facing severe debt problems. Spreads increased and, surprisingly,...

Using a newly developed dataset this paper examines the cyclicality of private capital inflows to low-income developing countries (LIDCs) over the period 1990-2012. The empirical analysis shows that capital inflows to LIDCs are procyclical, yet considerably less procyclical than flows to more...

Explanations of the large current account deficits for the euro area periphery and the Baltics in the run up to the crisis revolve around two main factors: deteriorating export performance or demand driven booms. We add that there were important movements in transfers and net income balances....