Given the backdrop of pressing infrastructure needs, this paper argues that higher German public investment would not only stimulate domestic demand in the near term and reduce the current account surplus, but would also raise output over the longer-run as well as generate beneficial regional...

This study shows that the origins of the sovereign debt crisis within the euro area are to be found within the private sector and in economic policy mistakes rather than only in the profligacy of some national governments in the Southern periphery of Euroland. Sovereign debtors and their private...

The creation of EMU raises the question whether the common monetary policy has the same impact in all member countries. We analyse the convergence of interest rates in four major EMU countries from 1999 to 2007. We suggest to test the convergence of the interest rates with the full term...

This paper analyses the impact of the Global Financial Crisis on the Euro area utilizing a simple dynamic macroeconomic model with interaction between monetary policy and fiscal policy. The model consists of an IS curve, a Phillips curve, a term structure relation, a debt accumulation equation...

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...

Staff Discussion Notes showcase the latest policy-related analysis and research being developed by individual IMF staff and are published to elicit comment and to further debate. These papers are generally brief and written in nontechnical language, and so are aimed at a broad audience...

In this paper we investigate the roots, nature and consequences of the exit strategies that have already been implemented or are likely to be implemented in the EMU countries after the financial and economic crisis. We show that there is a deflationary bias in the current institutional...

A few reflections on fiscal and monetary policy in the euro area (by J. Pöschl; pp. 1-3) Keywords fiscal policy, monetary policy, euro area Countries covered EU Topics Macroeconomic Analysis and Policy; International Trade, Competitiveness and FDI Unit labour costs, exchange rates and responses...