This paper incorporates a small and time-varying “disaster risk” à la Gourio (2012) in a New Keynesian model. A change in the probability of disaster may affect macroeconomic quantities and asset prices. In particular, a higher risk is sufficient to generate a recession without effective...

This paper investigates the past effectiveness of the Maastricht Treaty (MT) and Stability and Growth Pact (SGP) in disciplining fiscal policy in the Euro zone. We estimate fiscal reaction functions for a panel of 11 members of the Euro zone including the more recent period of the reformed SGP,...

The paper uses survey data to analyze whether the Stability and Growth Pact (SGP) has changed financial market’s expectations on government budget deficits in France, Germany, Italy, and the UK. Our findings indicate that accuracy of financial experts’ deficit forecasts has increased in...

This paper applies quantile regression techniques to investigate how the impact of trade openness on the growth rate of per capita income varies with the conditional distribution of growth. Using formal robustness analyses, we first identify robust variables affecting economic growth...