Empirical evidence shows that government spending crowds in private consumption, a Keynesian phenomenon. The current state of the art, New Keynesian models based on optimising households and _rms, is not able to predict such a result. We show with a graphical framework as well as a formal model...

Studies on central bank reaction functions find that central banks only caring about inflation stability, like the ECB, seem to follow a standard Taylor rule in the sense that the interest rate reacts significantly to variations in the output gap. We explain this result by claiming that the...

Standard New Keynesian models cannot generate the widely observed result that private consumption is crowded in by government spending. We use a New Keynesian endogenous growth model with endogenous labour supply to analyse this phenomenon. The presence of small direct productivity effects of...

Studies on central bank reaction functions find that central banks only caring about inflation stability, like the ECB, seem to follow a standard Taylor rule in the sense that the interest rate reacts significantly to variations in the output gap. We explain this result by claiming that the...

This paper extends a New Keynesian model with features of endogenous growth. This allows temporary shocks to have persistent effects, which in turn feeds back to short run demand and thus changes both the short and medium run response of the economy. The first major finding is that the model...

By distinguishing between discretionary and non-discretionary fiscal policy, this paper analyses the stability of fiscal rules for EMU countries before and after the Maastricht Treaty. Using both Instrumental Variables and GMM techniques, it turns out that discretionary fiscal policy remains...

This paper shows that investment inhuman capital may be another reason for incentive wages in addition to "retain, recruit and motivate". It is shown under which circumstances firms pay wages in excess of the market clearing level in order to induce workers to invest. Investment in human capital...

The focus of this paper is on rent distribution under different labour market regimes. When workers determine human capital investment and wages freely, while the firm sets labour demand, the rent created is shared. Investment in human capital is then inefficiently low. When there are unemployed...

By distinguishing between discretionary and non-discretionary fiscal policy, this paper analyses the stability of fiscal rules for EMU countries before and after the Maastricht Treaty. Using both Instrumental Variables and GMM techniques, it turns out that discretionary fiscal policy has...

In this paper we recognize that reforms of the welfare state can be necessary from an economic point of view. We stress, however, that these reforms also have important social and political dimensions. The social dimensions are conceptualised by using Hofstede''s cultural characteristics. The...