We show in a dynamic stochastic general equilibrium framework that the introduction of a common currency by a group of countries with only partially integrated goods markets, incomplete financial markets and no labor migration across member states, significantly increases volatility of...

We show in a dynamic stochastic general equilibrium framework that the introduction of a common currency by a group of countries with only partially integrated goods markets, incomplete financial markets and no labor migration across member states, significantly increases volatility of...

Between 1999 and the onset of the economic crisis in 2008 real exchange rates in Greece, Ireland, Italy, Portugal and Spain appreciated relative to the rest of the euro area. This divergence in competitiveness was reflected in the emergence of current account imbalances. Given that exchange rate...

Member countries of the euro area, and the peripheral states in particular, face an especially difficult problem: on the one hand, they urgently need stronger economic growth to reduce high debt and unemployment levels. On the other hand, however, they have no scope to use fiscal policy to...

Die Mitgliedsländer der Eurozone, vor allem die sogenannten Peripheriestaaten, stehen vor einem schwer zu lösenden Problem: Einerseits benötigen sie dringend ein stärkeres Wirtschaftswachstum, um die aufgebauten Schuldenberge abtragen und die Arbeitslosigkeit reduzieren zu können, verfügen...

Empirical studies support the hysteresis hypothesis that recessions have a permanent effect on the level of output. We analyze the implications of hysteresis for fiscal policy in a DSGE model. We assume a simple learning-by-doing mechanism where demand-driven changes in employment can affect the...

Using a DSGE model calibrated to the euro area, we analyze the international effects of a fiscal devaluation (FD) implemented as a revenue-neutral shift from employer's social contributions to the Value Added Tax. We find that a FD in ‘Southern European countries’ has a strong...

Between 1999 and the onset of the economic crisis in 2008 real exchange rates in Greece, Ireland, Italy, Portugal and Spain appreciated relative to the rest of the euro area. This divergence in competitiveness was reflected in the emergence of current account imbalances. Given that exchange rate...

We show in a dynamic stochastic general equilibrium framework that the introduction of a common currency by a group of countries with only partially integrated goods markets, incomplete financial markets and no labor migration across member states, significantly increases volatility of...

Between 1999 and the onset of the economic crisis in 2008 real exchange rates in Greece, Ireland, Italy, Portugal and Spain appreciated relative to the rest of the euro area. This divergence in competitiveness was reflected in the emergence of current account imbalances. Given that exchange rate...