In this paper, the following question is posed: Can the New Keynesian Open Economy Model by Galí and Monacelli (2005b) explain Six Major Puzzles in International Macroeconomicsʺ, as documented in Obstfeld and Rogoff (2000b)? The model features a small open economy with complete markets, Calvo...

We use a two-country model with a central bank maximizing union-wide welfare and two fiscal authorities minimizing comparable, but slightly different country-wide losses. We analyze the rivalry between the three authorities in seven static games. Comparing a homogeneous with a heterogeneous...

Current developments in Greece make clear that the rules of the European Stability and Growth Pact (SGP) were neither strict enough nor enforced strictly enough. To deal with the ongoing fiscal exit and its related phenomena of crisis, we propose a new framework for fiscal policy consolidation...