In the production function approach, an accurate output gap assessment requires a careful evaluation of the total factor productivity (TFP) cycle. We build a common cycle model that links TFP to capacity utilization and we show that, in almost all of the pre-enlargement EU countries, using...

This paper studies the effectiveness of Euro Area (EA) fiscal policy, during the recent financial crisis, using an estimated New Keynesian model with a bank. A key dimension of policy in the crisis was massive government support for banks—that dimension has so far received little attention in...