How sizable is the wealth effect on consumption in euro area countries? To address this question, we use newly available harmonized euro area wealth data and the methodology in Carroll et al. (2011b). We find that the marginal propensity to consume out of total wealth averaged across the largest...

The fiscal consolidation efforts of Spain, Italy, and Portugal from 2010 to 2014 did not achieve their goal of reducing the debt-to-GDP ratio in any of the three countries. This Economic Bulletin examines why the spending cuts and tax increases, at times drastic, were unsuccessful and...

All explorations of the future of the Euro show serious risks for its survival in the present form. The road map of the Five EU Presidents presented in 2015 is far from sufficient to reduce the risks of the Euro zone falling apart by Brexit type developments or new economic shocks. The EU...

We develop a stylized DSGE model in which banks face capital regulation and their loan portfolios are subject to non-diversifiable losses due to aggregate shocks. The framework is used to explore the importance of the interaction between macroeconomic conditions, credit default and bank...

Not since the Great Depression have monetary policy matters and institutions weighed so heavily in commercial, financial, and political arenas. Apart from the eurozone crisis and global monetary policy issues, for nearly two years all else has counted for little more than noise on a relative...

In this paper we suggest that Eurozone countries face a policy trade-off among: 1) a common rule imposing co-movements in fiscal policy; 2) financial stability; and 3) financial integration. We provide empirical evidence documenting the existence of such a trade-off in the period characterized...

Not since the Great Depression have monetary policy matters and institutions weighed so heavily in commercial, financial, and political arenas. Apart from the eurozone crisis and global monetary policy issues, for nearly two years all else has counted for little more than noise on a relative...

In the discussions of the need for fiscal rules and their usefulness in a monetary union researchers have not agreed on whether the financial markets have a sufficiently disciplining effect on the governments, which would mean that the fiscal rules are not necessary. This paper investigates...

In this paper we briefly review the evolution of the Italian economy in the post-war period, discussing the shift from a first period when fiscal policy was targeted - among other things - at full employment, to a later period when controlling inflation through a "foreign discipline" became the...

We study the sustainability of public debt in a closed production economy where a benevolent government chooses fiscal policies, including haircuts on its outstanding debt, in a discretionary manner. Government bonds are held by domestic agents to smooth consumption over time and because they...