The global financial crisis of 2008–09 has sent public debt on sharply higher trajectories. With the economic recovery gradually taking hold, the focus is now shifting to fiscal “exit” strategies. Medium-term consolidation efforts are likely to include not only tax increases but also...

Sovereign risk premia in several euro area countries have risen markedly since 2008, driving up credit spreads in the private sector as well. We propose a New Keynesian model of a two-region monetary union that accounts for this “sovereign risk channel.” The model is calibrated to the euro...

Using vector autoregressions on U.S. time series, we find that technology shocks induce an ‘S’- shaped cross-correlation function for the trade balance and the terms of trade (S-curve). In calibrating a prototypical international business cycle model to match the S-curve under complete and...

In order to understand the dynamic effects of government spending on foreign trade the present paper proceeds in two steps. First, using U.S. time series data for the post-Bretton-Woods period, the dynamic effects of government spending are investigated within a structural Vector Autoregression...