We examine the relationship between macroeconomic, institutional, and cultural indicators and cyclical fluctuations for European, Middle Eastern and North African Mediterranean countries. Mediterranean cycles are different from EU cycles: the duration of expansions is shorter; the amplitude and...

I revisit the General Theory's discussion of the role of wages in employment determination through the lens of the New Keynesian model. The analysis points to the key role played by the monetary policy rule in shaping the link between wages and employment, and in determining the welfare impact...

Using Bayesian methods, we estimate a nonlinear DSGE model in which the interest-rate lower bound is occasionally binding. We quantify the size and nature of disturbances that pushed the U.S. economy to the lower bound in late 2008 as well as the contribution of the lower bound constraint to the...

Most countries have automatic rules in their tax-and-transfer systems that are partly intended to stabilize economic fluctuations. This paper measures how effective they are. We put forward a model that merges the standard incomplete-markets model of consumption and inequality with the new...

This paper explores the dominant role of politics in decisions made by euro area governments during the crisis. Decisions that appear to have been driven by local political considerations to the detriment of the euro area as a whole are discussed. The domination of politics over economics has...

The recovery from the last recession has been slower than any other recovery in the post-WWII period both in the US and in many other advanced economies. There is an ongoing debate around the causes of such a slow recovery. Are there any structural factors that are constraining the speed of...

Recessions often happen after periods of rapid accumulation of houses, consumer durables and business capital. This observation has led some economists, most notably Friedrich Hayek, to conclude that recessions mainly reflect periods of needed liquidation resulting from past over-investment....

This paper contributes to a recent debate about the structural and institutional conditions under which discretion may be superior to timeless perspective. We show this is unlikely when the policy maker relies on a welfare-theoretic loss function obtained as a second-order approximation of...

This paper estimates the impact on the US economy of four types of uncertainty about (i) government spending, (ii) tax changes, (iii) public debt sustainability and (iv) monetary policy. Following a one standard deviation shock, uncertainty about debt sustainability has the largest and most...

This paper proposes a simple macroeconomic model with staggered investment decisions. The expected return from investing depends on demand expectations, which are pinned down by fundamentals and history. Owing to an aggregate demand externality, investment subsidies can improve welfare in this...