The Optimal Currency Area theory stresses the importance of co-movement of the business cycles of member states in order for the common currency to be successful. Yet, the identification of (European) business cycles has been inconclusive and is complicated by the enlargement to the new member...

The theory of economic policy has its roots in the contributions of Tinbergen and Theil, who solved the problem of a policymaker aiming to achieve certain values for his policy targets, or to minimize a loss function defined on those targets, by using the available policy instruments. After...

This paper addresses the issue of international payments in a stock-flow framework, by capturing the interaction between the current account balance and international assets portfolios of domestic and foreign investors. It is argued that the stability of such interaction may be affected by...

Optimal Currency Area theory stresses the importance of the co-movement of business cycles among Eurozone member states for a successful common currency. In this paper, we show how to decompose economic cycles in a time-frequency framework in order to compare the coherences and phase shifts for...

The current debate on the European crisis has highlighted the role of fiscal imbalances in explaining the turmoil that has dominated Europe in the past few years. This paper adopts a different point of view by suggesting that intra-European payments imbalances are crucial for the survival of the...

We address the coordination failures that arise in models with multiple equilibria and study how they may be resolved by reconsidering the role of cheap talk communication as an equilibrium selection device. We introduce an outside option (representing common-knowledge expected outcomes in the...

This paper presents two views of the European sovereign debt crisis. The first is that countries in the South of the Eurozone were fiscally irresponsible and failed to implement pro-competitive supply side policies. The second view holds that the crisis reflects a deep divide between the...

Alberto Alesina is distinguished for having introduced, or more properly re-introduced, political economy considerations into macroeconomic policy analysis. His seminal contributions to the problems of fiscal consolidation and the optimal size and number of nations (or the possibility that...

This paper outlines contents of the new theory of economic policy that has emerged recently with reference to situations of strategic interaction. The new theory of economic policy is rooted in the classical contributions of Ragnar Frisch, Jan Tinbergen, Bent Hansen and Henri Theil, while being...