Following the Great Recession, eurozone countries have performed worse than even the currency union’s most pessimistic critics had predicted. The paper identifies the strong fundamental flaws in the design of the eurozone and proposes a set of reforms, both in the structure of the eurozone and...

The democratic accountability of policymaking institutions which are autonomous within delegated mandates has not received as much attention as their independence. We analyze in a theoretical model the effects of accountability inthe form of possible overriding of economic policy decisions by...

Solving the problem of stabilizing the economy is directly tied to the necessity of keeping the main macroeconomic variables stable. However, macroeconomic stability is not in the general case a purely fiscal or a purely monetary problem. How the central bank and the government interact is of...

Leith and Wren-Lewis (2007) have shown that government debt is returned to its pre-shock level in a New Keynesian model under optimal discretionary policy. This has two important implications for monetary and fiscal policy. First, in a high-debt economy, it may be optimal for discretionary...

The paper aims to shed light on the relation between monetary and fiscal policy in EMU, focusing on the interest rates and deficit dynamics. We present a theoretical model in which monetary and fiscal policy independently interact in a closed economic system through their own instrument, namely,...

This paper studies the interactions of fiscal and monetary policy when they stabilise a single economy against shocks in a dynamic setting. We assume that fiscal and monetary policies both stabilise the economy only by causing changes to aggregate demand. Our findings are as follows. If the both...

The recent financial and economic crisis has triggered bold and diverse policy responses to prevent further, sharper and prolonged adverse effects to the financial and the real sector. The measures for alleviating the cycle were a feature both of the advanced and the emerging and developing...

This paper assesses the ECB’s performance, which the author finds to be seriously lacking but which is of paramount importance to understanding euroland’s ongoing stagnation and fragility. A main finding is that the series of policy blunders which characterized the bank’s conduct features...

The Bank of Canada Global Economy Model (BoC-GEM) is used to examine the effect of various types of discretionary fiscal policies on different regions of the globe. The BoC-GEM is a microfounded dynamic stochastic general-equilibrium global model with six regions, multiple sectors, and...