Some researchers have recently introduced productive government investment spending into Dynamic stochastic general equilibrium (DSGE) models, adding a supply channel. This paper takes a similar perspective but it also introduces the government consumption good into the household utility...

After a disappointing first-quarter GDP data, some early signs of improvement in key economic indicators have emerged recently in the euro area. This is evident from the rebalancing of demand and supply via the inventory adjustment. Euro-area exports are starting to show signs of stabilisation,...

This paper analyses the adjustment mechanism in the euro area prior to the crisis. Results show that the real exchange rate adjusted to redress cyclical divergences and that after monetary unification, real exchange rate dynamics became less reactive to country-specific shocks but also less...