Tiny changes in the American monetary policy can have dramatic effects on the rest of the world because of dollar's double role of national and international currency. This is the Triffin dilemma. The paper shows how it works through three examples: price of commodities, dollarization, and the...

We offer a detailed empirical investigation of the European sovereign debt crisis based on the theoretical model by Arghyrou and Tsoukalas (2010). We find evidence of a marked shift in market pricing behaviour from a 'convergence-trade' model before August 2007 to one driven by...

This article, originally published at www.roubini.com on 7 February 2010, spells out our two-currency EMU proposal as a plan of last resort for resolving the present EMU sovereign-debt crisis. The key ingredients of our proposal involve a temporary split of the euro into two currencies, both run...

We build a tractable stylized model of external sovereign debt and endogenous international interest rates. In corrupt economies with rent-seeking groups stealing public resources, a politico-economic equilibrium is characterized by permanent fiscal impatience which leads to excessive issuing of...

With a view to establishing a Capital Markets Union (CMU), efforts to integrate (private) capital markets and private risk-sharing in the European Union are underway. However, the single (capital) market will be burdened by a perennial potential threat to sovereign bond market stability in the...

We build a tractable stylized model of external sovereign debt and endogenous international interest rates. In corrupt economies with rent-seeking groups stealing public resources, a politico-economic equilibrium is characterized by permanent fiscal impatience which leads to excessive issuing of...

When monetary policy is constrained by the zero lower bound, fiscal policy can be used to achieve macro stabilization objectives. At the same time, fiscal policy is also a key policy variable within a single currency area that allow policy-makers to respond to regional demand asymmetries. How do...

We explore income and consumption smoothing patterns among European Community (EC) countries and among OECD countries during the period 1966--90. We find that, for OECD as well as for EC countries, about 40 percent of shocks to GDP are smoothed at the one year frequency, with about half the...

We study how monetary policy affects local market competition in a union of countries experiencing different economic conditions: the euro area. We find that when monetary conditions tighten (loosen), from the point of view of an individual economy, market concentration increases (declines)....

This study extends Bayoumi and Eichengreen's (1993) empirical methodology in order to give a reappraisal of the core-periphery view of the enlarged euro area. We show how to derive two useful indices from the “correlation box” formed by aggregate demand and supply shocks. One measures the...