This article examines whether there is a political budget cycle (PBC) in countries in the euro area. Using a multivari ate model for 1999–2004 and various election indicators we find strong evidence that, since the start of the Stability and Growth Pact, fiscal policy-makers in the euro...

Empirical research on contagion between international stock markets generally focuses on index returns converted into US dollars. This paper argues that it would be more appropriate to use returns denominated in countries' local currencies, as only these returns accurately reflect price...

We examine the impact of news about Greece and news about a Greek bailout on bank stock prices in 2010 using data for 48 European banks. We identify the twenty days with extreme returns on Greek sovereign bonds and categorise the news events during those days into news about Greece and news...

If output gaps in a currency union are not sufficiently coherent, the common monetary policy will not be optimal for all countries or regions in the union. It is common practice to measure coherence of output gaps by a correlation coefficient. We propose new measures of output gap coherence,...

Financial contagion studies generally examine whether co-movement between markets increases during a crisis. We use a flexible co-movement measure to examine how conclusions of such analyses depend on the sample chosen as the ‘crisis’. To this end, we analyse stock market co-movement during...