Cultural proximity increases bilateral trade flows through a trade-cost and a bilateral-affinity (preferences) channel. Conventional measures of cultural proximity, such as common language, common religion, etc., do not allow to separately quantify those channels empirically. We argue that...

The recommended way of helping households during the ongoing European energy crisis is to allow price signals to operate freely while providing targeted compensation to the vulnerable. In practice, however, institutional, political, and technical constraints have led many European governments to...

We use firm-level data from 10 European countries to establish several new stylized facts about firms' labor market power. First, we find the pervasive presence of labor market power across countries and sectors, measured by average and median markdowns above unity. Second, focusing on the...

Economic growth has tumbled across Europe, inflation remains too high, and financial sector risks have materialized. Taming sticky inflation while avoiding financial stress and a recession will require tighter macroeconomic policies-tailored to changing financial conditions, stronger financial...

In 2021-22, inflation in Europe soared to multidecade highs, consistently exceeding policymakers' forecasts and surprising with its wide cross-country dispersion. This paper analyzes the key drivers of the inflation surge in Europe and its variation across countries. The analysis highlights...