In this paper we analyze the (potential) effects of labour market and fiscal policy reforms by heterogeneous European countries—Germany and France—on the domestic and foreign economy. We test the implications of the gains in matching efficiency and reduced unemployment benefits induced by...

We consider a neo-keynesian model with staggered prices and wages. When both contracts exhibit sluggish adjustment to market conditions, the policy maker faces a trade-off between stabilizing three welfare relevant variables : output, price inflation and wage inflation. We consider a monetary...

Policymakers use forecasts to project the consequences of particular policy decisions for certain policy targets. This chapter investigates the use of economic forecasting in policy making by discussing practical examples, providing new empirical evidence and computing forecasts using different...