The purpose of this study is the examination of the relationship between fiscal and Current Account balances for the countries of southern eurozone. The twin deficit hypothesis is tested within the context of a portfolio model involving variables from the financial sector. Empirical analysis is...

The paper adds to the literature as follows: starting from the benchmark model of Asdrubali et al. (1996), we reproduce the original specification with a data set obtained from the authors as well as possible. In a second step, this specification is brought to euro area data. Again, the results...

The rise in sovereign bond holdings in stress countries could deepen a recession by allocating resources away from the private sector. Our paper investigates whether the demand function for sovereign bonds changed in the crisis period and the causes of such a change. We show that it did, and...

The aim of this paper is to evaluate the trade linkages of Central and Eastern European (CEE) countries with the global economy in the last decade and to measure the influence of the world economic crisis of 2009 on their external trade sector. For this purpose an analysis of IMF data (Direction...

This paper aims at empirically assessing the effect of the adoption of the euro on the ability of euro area member states to smooth consumption and share risk. With the objective of evaluating the economic performance of euro area countries in the scenario where the euro had not been adopted, we...

Central Bank participants at the BIS 2008 Open Economies Meeting in Punta del Este, Uruguay, discussed trends in capital flows since 2003 and their monetary and financial stability implications. Capital flows appear to be more benign today than in the past, partly because of a greater share of...

The business cycles of advanced economies are synchronized. Standard macro models fail to explain that fact. This paper presents a simple model of a two-country, two-traded good, complete-financial-markets world in which country-specific productivity shocks generate business cycles that are...

During the last two decades, the degree of openness of national financial systems has increased substantially. At the same time, asymmetries in information and other financial market frictions have remain prevalent. We study both empirically and theoretically the implications of the opening up...

This paper argues that the 40-year-old Feldstein-Horioka “puzzle” (i.e., in a regression of the domestic investment rate on the domestic saving rate, the estimated coefficient is significantly larger than expected in a world with high capital mobility) should have never been labeled as such....

This chapter is structured in three parts. The first part outlines the methodological steps, involving both theoretical and empirical work, for assessing whether an observed allocation of resources across countries is efficient. The second part applies the methodology to the long-run allocation...