We construct a model of a monetary union to study fiscal consolidation in the Periphery of the euro area, through cuts in public sector wages or hiring when the nominal interest rate is constrained at its lower bound. Consolidation induces a positive wealth effect that increases demand, as well...

High unemployment and fiscal austerity during the Great Recession have led to significant migration outfl ows in those European countries that suffered a deep deterioration of their economy, Greece being the most obvious case. This paper introduces endogenous migration in a small open economy...