This paper studies welfare consequences of a soft borrowing constraint on sovereign debt which is modeled as a proportional fine per unit of debt exceeding some reference value. Debt is the result of myopic fiscal policy where the government is assumed to have a smaller discount factor than the...

The paper analyses the EU fiscal rules from a political economy perspective and derives some policy lessons. Following a literature survey, the paper stresses the importance of appropriate incentives for rule compliance in an environment where national fiscal sovereignty precludes the option of...

How much discretion should the monetary authority have in setting its policy? This question is analyzed in an economy with an agreed-upon social welfare function that depends on the randomly fluctuating state of the economy. The monetary authority has private information about that state. In the...

The analysis of the macroeconomic impact of fiscal policies in the euro area has been traditionally limited by the absence of quarterly fiscal data. To overcome this problem, we provide two new databases in this paper. Firstly, we construct a quarterly database of euro area fiscal variables for...

The discussion presently taking place in the large eurozone economies about the reform of the social welfare state is dominated by two assertions: Western Europe as an investment location is too expensive due to its high tax burden, and, second, countless jobs are threatened from low-wage...

This evaluation of the Greenland Decision (GD) will feed into the Mid-Term Review of the European Union’s 2014-2020 External Financing Instruments (EFIs), taking place in 2017. The evaluation assesses whether the instrument is fit for purpose to deliver EU resources in keeping with the EU‘s...