The origins of the Greek-sovereign debt crisis were the country’s large fiscal and external imbalances. The key factor that abetted those imbalances was the absence of a short-tomedium term adjustment mechanism -- due to perceptions of sovereign bailouts -- in the euro-area that would have...

Trade is spatial in nature. However, when specifying trade regressions, spatial issues are typically not accounted for in a satisfactory way. We specify a trade model which relates to the effects that the introduction of the euro had on exports for the euro countries. Our model contains country...

As part of its monetary policy strategy, the European Central Bank has formulated a reference value for M3 growth. A pre-requisite for the use of a reference value for M3 growth is the existence of a stable demand function for that aggregate. However, a large empirical literature has emerged...

On February 24-25, 2006 an international workshop on “Regional and International Currency Arrangements” was held in Vienna. It was co-sponsored by the Oesterreichische Nationalbank and the Bank of Greece, and jointly organized by Eduard Hochreiter and George Tavlas. Academic economists and...

We compare monetary union to flexible exchange rates in an asymmetric, three country model with active monetary policy. Unlike the traditional OCA literature, we find that countries with a high degree of nominal wage rigidity benefit from monetary union, specially when they join other, similarly...

We investigate the drivers of the recent inflation in three currency areas: the United States, the euro area, and the United Kingdom. To do so, we use a VAR set-up to examine the nature of the shocks that underpinned the recent inflation. We apply two methods to calculate shocks -- the standard...

The euro-area sovereign debt crisis was characterized by feedback loops between (1) sovereign bond ratings and sovereign spreads in single jurisdictions and (2) sovereign spreads and ratings among jurisdictions. One explanation of this circumstance is that the ECB was unable to perform the role...

We examine the impact of emergency liquidity assistance (ELA) on bank lending in eleven euro area countries during the financial crisis. With the intensification of the crisis, ELA took on a pivotal role in some countries. However, assessments of the quantitative impact of ELA in the literature...

The euro-area financial crisis that erupted in 2009 was marked by negative confidence effects that had both domestic and international ramifications. Domestically, bank lending declined sharply. Internationally, the demand for the euro as a reserve currency fell precipitously. We investigate the...

We examine the impact of the ECB’s Securities Market Program (SMP) and the ECB’s two Covered Bond Purchase Programs (CBPPs) on sovereign bond spreads and covered-bond prices, respectively, for five euro-area stressed countries -- Greece, Ireland, Italy, Portugal, and Spain. Our data are...