The recent European economic crisis has dramatically exposed the failures of the various institutional mechanisms in place to maintain economic stability in Europe, and has unveiled the difficulty in achieving international coordination on fiscal and financial stability policies. Drawing on the...

European economic integration fascinates and inspires for the way it brought peace to a continent torn by violent and long-standing rivalries. The lessons from Europe, however, cannot be applied directly as the degree of the European Union's supranationality is unthinkable elsewhere. This paper...

This paper studies the incentives to join or enlarge a monetary union under alternative assumptions about the extent of market reform within the union and in candidate countries. Lack of labour mobility, wage/price flexibility or fiscal reform brings costs for both new entrants and in the...

European economic integration fascinates and inspires for the way it brought peace to a continent torn by violent and long-standing rivalries. The lessons from Europe, however, cannot be applied directly as the degree of the European Union's supranationality is unthinkable elsewhere. This paper...

European economic integration fascinates and inspires for the way it brought peace to a continent torn by violent and long-standing rivalries. The lessons from Europe, however, cannot be applied directly as the degree of the European Union's supranationality is unthinkable elsewhere. This paper...

I build a quantitative two-country DSGE model of the European Union (EU) and investigate whether there are welfare gains from fiscal policy cooperation between the new EU members and the euro area (EMU). Fiscal cooperation is defined in terms of joint maximization of the weighted average of...

What are the macroeconomic effects of tax adjustments in response to large public debt shocks in highly integrated economies? The answer from standard closed-economy models is deceptive, because they underestimate the elasticity of capital tax revenues and ignore crosscountry spillovers of tax...

Europe's debt crisis casts doubt on the effectiveness of fiscal austerity in highly-integrated economies. Closed-economy models overestimate its effectiveness, because they underestimate tax-base elasticities and ignore cross-country tax externalities. In contrast, we study tax responses to debt...

The current debt crisis has given rise to a debate about deeper fiscal integration in Europe. The view is widespread that moving towards a 'fiscal union' would have a stabilising effect in the event of macroeconomic shocks. In this paper we study the economic effects of introducing two elements...