This paper studies the impact of the state-dependent risk of a government default on the correlation of the scal balance and current account. We use a small open economy model where nonlinear risk premia arise endogenously when the government operates close to its scal limit, i.e. the maximum...

We develop a three-country, stock-flow consistent macroeconomic model to study the effects of changes in both personal and functional income distribution on national current account balances. Each country has a household sector and a non-household (corporate) sector. The household sector is...

This study analyzes the dynamics between real effective exchange rates and current account patterns from a novel perspective. We start by dissecting long-run and time-varying short-run dynamics between both variables. Following this, we extend our framework by including interest rates into our...

Between 1999 and the onset of the economic crisis in 2008 real exchange rates in Greece, Ireland, Italy, Portugal and Spain appreciated relative to the rest of the euro area. This divergence in competitiveness was reflected in the emergence of current account imbalances. Given that exchange rate...

Since the breakdown of the Bretton Woods System diverging current account positions in Europe have prevailed. While the Southern and Western European countries have tended to run current account deficits, the current accounts of the Central and Northern European countries, in particular Germany,...

This paper indicates that the extent of collective bargaining coverage in an industry may depend on the differences in firms productivity levels within the industry. Less pronounced differences in productivity levels make it easier to design collective wage contracts that are accepted by a wider...

This paper investigates the effect of market size on innovation activities across different durable good industries in the Chinese manufacturing sector. We use a potential market size measure driven only by changes in the Chinese income distribution which is exogenous to changes in prices and...

This paper explores the fiscal devaluation hypothesis in a model of a monetary union characterised by national fiscal and supranational monetary policy. We show that a unilateral tax shift towards indirect taxes in one of the countries produces small but non-negligible long-run effects on output...