In this paper we set up a baseline, but nevertheless advanced and complete model representing detailed goods market dynamics, heterogeneous labor markets, dual and cross-dual wage-price adjustment processes, as well as counter-cyclical government policies. The cyclical movements of output...

Sustainability of public debt has become a major issue in the debate over the success of the European Monetary Union. The authors pursue the question of whether Germany’s fiscal policy is sustainable. With sustainability of a given fiscal policy, the authors refer to a policy that...

We formulate a macro-model of a small open economy in order to investigate the relative performance of rules that respond to asset prices and those that do not. Our model consists of three asset prices: the stock price, the long-term interest rate and the exchange rate. These asset prices...

This report elucidates one aspect of economic IAMs: the damage function. Damage functions map environmental changes (primarily mean temperature increases) to economic impacts. This crucial step in the determination of SCC appears in very different form in the leading economic IAMs. Through...

We analyze the feedback mechanisms between economic downturns and financial stress for several euro area countries. Our study employs newly constructed financial condition indices that incorporate banking variables extensively. We apply a non-linear Vector Smooth Transition Autoregressive...

The paper considers the transition of an economy from non-renewable to renewable energy. The Hotelling theorem suggests to extract a non-renewable resource in an optimal way such that the resource tends to be depleted when optimally extracted. Yet,it might not be reasonable to deplete...

This paper presents a stochastic dynamic model that can be used to describe situations in asset management where hedge funds may inadvertently find themselves running a Ponzi financing scheme. Greater transparency is necessary to reduce such opportunities, such as audited financials, and...