Discussions of the economic costs and benefits of EMU usually take as their basis the optimum currency area (OCA) approach. This approach starts from the premise that when an external shock hits the economy, it is easier to adjust the exchange rate than domestic prices or wages. Most economists...

Industrial production in G7 countries is assumed to be driven by two exogenous disturbances. Those disturbances are identified in a VAR model so they can be interpreted as countryspecific and global supply shocks. The dynamic properties of the model are analyzed and the relative importance of...

We investigate into the role of the trade channel as important determinant of a country's current account position and the degree of business cycle synchronization with the rest of the world by comparing the predictions of two types of DGE models. It is shown that the behavior of a country's...

We consider the real life implementation of some key elements of the new economic governance framework for the euro area. The main findings are the following. The Country Specific Recommendations issued in the context of the European Semester seem to be too little ‘specific’ to constrain...

The purpose of this contribution is to illustrate the interaction between oil prices and the global savings equilibrium which can invert the usual IS type relationship between growth and interest rates. Higher growth is usually associated with higher interest rates. But higher growth leads to...

Since the European Council of June 2012, ‘banking union’ is a key item for the EU's policy agenda. This contribution outlines the state of the policy debate – identifying the elements that are missing but important from a theoretical viewpoint. Concrete proposals are made as to how the...

With disparities in national unemployment rates reaching record levels, the debate on fi scal stabilisers in Europe has gained new momentum. Can a European unemployment insurance scheme help to absorb asymmetric shocks and bring about the desired level of macroeconomic stabilisation? What should...

In the aftermath of the financial crisis trust, in the European Central Bank (ECB) has reached an historical low. Taking panel data and using a fixed effects DFGLS estimation for a 12–country sample over the time period 1999 to 2011 with a total of 312 observations, this paper detects a...