This chapter provides a critical overview of the state of the art in the economics literature on structural reforms. It takes stock of theoretical developments, measurement efforts and of the econometric evidence. We start with a simple theoretical framework for the relationship between...

Financial crisis can trigger policy reversals, i.e. they can lead to a process of re- regulation of financial markets. Using a recent comprehensive dataset on financial liberalization across 94 countries for the period between 1973 and 2015, we formally test the validity of this prediction for...

Since the announcement of the Outright Monetary Transactions (OMT) programme by Mario Draghi, President of the ECB, in 2012, the government bond spreads began a strong decline. This paper finds that most of this decline is due to the positive market sentiments that the OMT programme has...

Optimal currency area (OCA) theory has been influential in pushing eurozone countries towards structural reforms to make product and labour markets more flexible. The underlying assumption of the OCA prescription for structural reform is that asymmetric shocks are permanent. However, when shocks...

It is well-known that the high synchronization of the business cycles among industrial countries cannot easily be replicated in standard open economy macroeconomic models without assuming that the exogenous shocks hitting these countries are highly correlated. We develop a two-country behavioral...

This contribution focuses on a recent proposal put forward by the European Systemic Risk Board to create a “safe asset” for the eurozone based on a repackaging of the risks of sovereign bonds, in the hope of stabilising an otherwise unstable system of sovereign bond markets. In the present...

We first present a simple model of post-crisis policymaking driven by both public and private interests. Using a novel dataset covering 94 countries between 1973 and 2015, we then establish that financial crises can lead to government interventions in financial markets. Consistent with a public...

We analyse the use of current and forward-looking data in the setting of monetary policy (Taylor rule). We answer the question of whether the use of forward-looking data is to be preferred over the use of current data. We use a behavioural macroeconomic model that generates periods of...

This paper finds evidence that a significant part of the surge in the spreads of the PIGS countries (Portugal, Ireland, Greece and Spain) in the eurozone during 2010-11 was disconnected from underlying increases in the debt-to-GDP ratios, and was the result of negative market sentiments that...

Since the announcement of the Outright Monetary Transactions (OMT) programme by Mario Draghi, President of the ECB, in 2012, the government bond spreads began a strong decline. This paper finds that most of this decline is due to the positive market sentiments that the OMT programme has...