A two-country sticky-price model is used to analyse the interactions between fiscal and monetary policy. The role of an u0091activistu0092 fiscal policy as a stabilisation tool is considered and a measure of the welfare gains from international fiscal policy cooperation is derived. It is found...

The presence of a lower bound of zero on nominal interest rates has important implications for the conduct of optimal monetary policy. Standard rational expectations models can have alternative steady states as well as non-unique laws of motion, i.e. there can be possible sunspot equilibria....

We use a Vector Auto Regression (VAR) analysis to explore the (spill-over) effects of fiscal policy shocks in Europe. To enhance comparability with the existing literature, we first analyse the effects of these shocks at the national level. Here, we employ identification based on Choleski...

This Country Focus assesses the extent to which the recent tax-revenue increases in Cyprus is of a permanent nature or whether is of temporary nature, linked to short lived asset boom. Between 2002 and 2008 the Cypriot economy grew at an annual average rate of about 3½% in real terms,...

Given the consolidation needs and the provisions of the new fiscal rule, budgetary planning in Germany has become more demanding. Fiscal projections are already difficult since the link between total tax revenue and economic activity is observed to be unstable. This Country Focus identifies...

This study focuses on the most important drivers of the swift current account rebalancing which is taking place in Estonia and considers the possible way forward. After very large deficits in the boom years (2005-2007), Estonia's current account balance turned positive in the downturn, as...