This paper analyzes the effects of different labor market institutions on inflation and output volatility. The eurozone offers an unprecedented experiment for this exercise: since 1999, no national monetary policies have been implemented that could account for volatility differences across...

The current debt crisis has given rise to a debate about deeper fiscal integration in Europe. The view is widespread that moving towards a 'fiscal union' would have a stabilising effect in the event of macroeconomic shocks. In this paper we study the economic effects of introducing two elements...

How does the asymmetry of labor market institutions affect the adjustment of a currency union to shocks? To answer this question, this paper sets up a dynamic currency union model with monopolistic competition and sticky prices, hiring frictions and real wage rigidities. In our analysis, we...

Competitiveness differentials are blamed for the instability of the Eurozone. Most of the analyses focus on labour costs or labour-market institutions. This paper explores an additional source of differentials in competitiveness: land and building prices. European countries, especially France,...

During the last decade, economists have intensively searched for evidence on the importance of the Balassa-Samuelson (B-S) hypothesis in explaining nominal convergence. One general result is that B-S can at best explain only part of the excess inflation observed in the European catching-up...

We examine the trajectories of the real unit labour costs (RULCs) in a selection of Eurozone economies. Strong asymmetries in the convergence process of the RULCs and its components – real wages, capital intensity, and technology – are uncovered through decomposition and cluster analyses. In...

This paper presents an empirical assessment of the endogenous optimum currency area theory. Frankel and Rose (1998) study the endogeneity of a currency union through the lens of international trade flows. Our study extends Frankel and Rose's model by using FDI flows to test the original theory...

The purpose of this paper is to assess the implications of the Economic and Monetary Union (EMU) accession of eight Central and Eastern European Countries (CEECs) on their share in EMU-12 imports. Overcoming biases related to endogeneity, omitted variables and sample selection, our results...

This research note discusses the Euro crisis in Greece in light of the referendum of July the 5th. It lays out the social and political costs of a GREXIT, but also of a continuing austerity policy. It proposes a reform policy fostering growth in Greece and discusses the role of conditionality....

The interest rate represents an important monetary policy tool to steer investment in order to reach price stability. Therefore, implications of the exact form and magnitude of the interest rate-investment nexus for the European Central Bank's effectiveness in a low interest rate environment...