Banks and financial market infrastructures (FMIs) that are not able to fulfill their payment obligations can be a source of financial instability. This paper develops a composite risk indicator to evaluate the criticality of participants in a large value payment system network, combining...

Building on the vast literature, this paper focuses on the role of the structure of the international investment position (IIP) in affecting countries' external vulnerabilities. Using a sample of 73 advanced and emerging economies and new database on the IIP's currency composition, we find that...

A hypothetical European Minimum Wage (MW) set at 60 percent of each country's median wage would reduce in-work poverty but have limited effects on overall poverty, as many poor households do not earn a wage near MW and higher unemployment, higher prices, and a loss of social insurance benefits...

We build a factor-augmented interacted panel vector-autoregressive model of the Euro Area (EA) and estimate it with Bayesian methods to compute government spending multipliers. The multipliers are contingent on the overall monetary policy stance, captured by a shadow monetary policy rate. In the...

The paper examines the causes, consequences, and potential cures of the large current account deficits in the Southern Euro Area (SEA). These were mostly driven by a decline in private saving rates. But it was the European Monetary Union and the Euro, which enabled these countries to maintain...

When does trade become a one-way relationship? We study bilateral trade balances for a sample of 18 European countries over the period from 1948 through 2008. We find that, with the introduction of the euro, trade imbalances among euro area members widened considerably, even after allowing for...

The paper examines the extent to which current account imbalances of euro area countries are related to intra-euro area factors and to external trade shocks. We argue that the traditional explanations for the rising imbalances are correct, but are incomplete. We uncover a large impact of...

The paper examines progress with the external rebalancing of euro area deficit countries. Relative prices are adjusting at different pace across countries and with different compositions of wage cuts and labor shedding. There is so far limited evidence of resource re-allocation from non-tradable...

We use a mean-adjusted Bayesian VAR model as an out-of-sample forecasting tool to test whether money growth Granger-causes inflation in the euro area. Based on data from 1970 to 2006 and forecasting horizons of up to 12 quarters, there is surprisingly strong evidence that including money...