This paper shows that unit labor costs (ulcs), the most widely used measure of competitiveness, can be interpreted as the labor share in output multiplied by a price-adjustment factor. This has three main implications. First, ulcs are not just a technical concept since they embody the social...

The importance of the time-consistency poblem depends critically on the model one is working with and its parameterizations. This paper attempts to quantify the magnitude of stabilization bias for a small open economy using an empirically estimated micro-founded dynamic stochastic general...

Time series analysis for the Euro Area requires the availability of sufficiently long historical data series, but the appropriate construction methodology has received little attention. The benchmark dataset, developed by the European Central Bank for use in its Area Wide Model (AWM), is based...

Monetary and fiscal policies interact in many ways. Recently, the stance of fiscal policy in a number of countries (including the EU and the US) has raised concerns about risks for the outcomes of monetary policy. Our paper first shows that these concerns are justified since - under an ambitious...

Using data from metropolitan U.S. labor market areas, we quantify empirical associations between entry by small firms and a vector of economic performance measures encompassing levels, volatilities, and growth rates of several income and employment variables. Distinct and robust associations are...

This paper demonstrates that exaggerated risk aversion may comprise a rational form of strategic behavior in the face of asymmetric information. Unlike some other forms of strategic behavior analyzed previously, this behavior confers a benefit in the form of higher ex post consumption (not...

Jointly identifying the effects of both fiscal and monetary policy shocks in an open economy structural VAR poses identification challenges. The innovations in this paper are to combine the methods of identification via sign restrictions, cointegration and traditional exclusion restrictions...

This paper uses a new dataset to study the relationship between economic output and sovereign default for the period 1820-2004. We fi?nd a negative but surprisingly weak relationship between output and default. Throughout history, countries have indeed defaulted during bad times (when output was...

We consider an experimental setting where traders in stock markets or exchange rate markets receive one stylized piece of information at a time about the value of an asset. We find that having limited knowledge about the prior distribution of true asset values does not hamper the decision making...

We develop multivariate measures of synchronicity and co-movement of business cycles. In addition to synchronicity, the co-movement measure takes differences between cycle amplitudes into account that have been overlooked in most previous studies. We apply the new measures to the euro area....