This paper employs stochastic simulations of the New Area-Wide Model - microfounded open-economy model developed at the ECB - to investigate the consequences of the zero lower bound on nominal interest rates for the evolution of risks to price stability in the euro area during the recent...

This paper employs stochastic simulations of the New Area-Wide Model—a micro-founded open-economy model developed at the ECB—to investigate the consequences of the zero lower bound on nominal interest rates for the evolution of risks to price stability in the euro area during the recent...

The paper reviews the experience of regional economic cooperation in the Gulf Cooperation Council (GCC). Conceived as a regional security alliance, the GCC has evolved to become a common market in the making. All six GCC countries participate in the common market project, and additional...

Some euro area countries accumulated large and persistent external imbalances during the upswing, revealing important weaknesses in the macroeconomic management of the monetary union. Greece, Ireland, Portugal and Spain ran large current account deficits by historical standards, while Finland,...

Sovereign risk premia in several euro area countries have risen markedly since 2008, driving up credit spreads in the private sector as well. We propose a New Keynesian model of a two-region monetary union that accounts for this "sovereign risk channel." The model is calibrated to the euro area...

Using PESSOA, a DSGE model for a small euro area economy, we analyze the size of fiscal multipliers associated with a large fiscal consolidation in "normal times" and in "crisis times." The crisis times scenario embodies a temporary increase in nominal rigidities and in financial frictions,...

How much did fiscal policy contribute to euro area real GDP growth during the Great Recession? We estimate that discretionary fiscal measures have increased annualized quarterly real GDP growth during the crisis by up to 1.6 percentage points. We obtain our result by using an extended version of...