This paper studies the effectiveness of Euro Area (EA) fiscal policy, during the recent financial crisis, using an estimated New Keynesian model with a bank. A key dimension of policy in the crisis was massive government support for banks—that dimension has so far received little attention in...

This paper proposes a perturbation-based approach to implement the idea of endogenous financial risk in a standard DSGE macro-model. Recent papers, such as Mendoza (2010), Brunnermeier and Sannikov (2012) and He and Krishnamurthy (2012), that have stimulated the research field on endogenous risk...

The labour market situation of low-educated people is particularly critical in most advanced economies, especially among youngsters and women. Policies aiming to increase their employability either try to foster their productivity and/or to decrease their wage cost. Yet, the evidence on the...

There are two main approaches to modelling monetary policy; simple instrument rules and optimal policy. We propose an alternative that combines the two by extending the loss function with a term penalizing deviations from a simple rule. We analyze the properties of the modified loss function by...

We analyze the impact of the countercyclical capital buffers held by banks on the supply of credit to firms and their subsequent performance. Countercyclical ‘dynamic’ provisioning unrelated to specific loan losses was introduced in Spain in 2000, and modified in 2005 and 2008. The resultant...

Robert Triffin became famous with his trenchant analyses of the vulnerabilities of the Bretton Woods system. These are still at the center of many discussions today. This paper argues that there is a remarkable continuity in Triffin's work. From his earliest writings, Triffin developed a vision...

We use a unique longitudinal dataset that tracks the exporting behavior of Belgian manufacturing firms between 1997 and 2009. We ask how slack resources, including financial and human resource slack, influence firms’ exporting behavior. Our findings suggest that both types of slack resources...

After the recent banking crisis in 2008, financial market conditions have turned out to be a relevant factor for economic fluctuations. This paper provides a quantitative assessment of the impact of financial frictions on the U.S. business cycle. The analysis compares the original Smets and...

We analyze the similarities and the differences in the fragility of the European Monetary System (EMS) and the Eurozone. We test the hypothesis that in the EMS the fragility arose from the absence of a credible lender of last resort in the foreign exchange markets while in the Eurozone it was...

Policy-making institutions such as the European Commission, the ECB and the OECD often use unit labor costs as a measure of international competitiveness. The goal of this paper is to examine how well this measure is related to international export performance at the firm level. To this end, we...