Using national account data, we define corporate balance sheet adjustment episodes as periods during which major increases in non-financial corporations' net lending/borrowing are experienced. An analysis of such episodes in Germany and Japan, and a more systematic exploration of a sample of 30...

The paper extends the QUEST III model by home production to discuss fiscal limits in an economy with tax avoidance. It finds that revenue-maximising labour and corporate tax rates in the benchmark model are relatively high (54% and 72%) compared to current EU-average implicit tax rates. No such...

The empirical study carried out by London Economics on behalf of the European Commission analysed the market value of state guarantees given to banks in 2008-10 on banks' issuing costs and whether there were significant differences visible in the balance sheets of banks that used state...

This paper analyses the interactions between household wealth, mortgage decisions and savings in a single empirical framework and identifies an important role for a "down-payment channel" in the euro area. Contrary to the traditional housing wealth channel, the "down-payment channel" posits a...

Why has euro area (core) inflation not fallen further during and after the "great recession"? How different are inflation dynamics across Member States? This paper analyses core inflation dynamics in the euro area and its Member States using a hybrid specification of the Phillips curve....

This paper analysis the macroeconomic effects of government support measures to the financial sector using a microfounded structural model. We simulate a crisis scenario in which the economy is hit by a severe financial shock and is subject to financial market imperfections. We then look at...

The success of a consolidation in reducing the debt ratio depends crucially on the value of the multiplier, which measures the impact of consolidation on growth, and on the reaction of sovereign yields to such a consolidation. We present a theoretical framework that formalizes the response of...

This study uses vector auto-regression (VAR) models and a panel fiscal reaction function (FRF) to simulate debt ratios for fifteen EU Member States according to four regimes which are the product of the type of errors (normal or bootstrapped) with the assumption on the structural primary balance...

This paper uses an estimated DSGE model to analyse the factors behind the build-up of imbalances in the Spanish economy. Shock decompositions suggest that external imbalances have been able to build up mainly due to the reduction in real interest rates and easier access to credit following the...

Variables commonly used, in a panel setting, to explain unemployment rate developments (e.g. Bassanini and Duval (2006a, 2006b)) provide similarly good fit for structural unemployment rate, as measured by the Commission services (i.e. the so-called NAWRU). Those variables include labour market...