Trust in policy makers fluctuates significantly over the cycle and affects the transmission mechanism. Despite this it is absent from the literature. We build a monetary model embedding trust cycles; the latter emerge as ...

The paper uses fiscal reaction functions for a panel of euro-area countries to investigate whether euro membership has reduced the responsiveness of countries to shocks in the level of inherited debt compared to the period ...

We examine whether the robustifying nature of Taylor rule cross-checking under model uncertainty carries over to the case of parameter uncertainty. Adjusting monetary policy based on this kind of cross-checking can improve ...

"The implications of delegating fiscal decision making power to sub-national governments has become an area of significant interest over the past two decades, in the expectation that these reforms will lead to better and ...

We show that the correct experiment to evaluate the effects of a fiscal adjustment is the simulation of a multi year fiscal plan rather than of individual fiscal shocks. Simulation of fiscal plans adopted by 16 OECD countries ...

After the Global Financial Crisis a controversial rush to fiscal austerity followed in many countries. Yet research on the effects of austerity on macroeconomic aggregates was and still is unsettled, mired by the difficulty ...

Europe’s debt crisis casts doubt on the effectiveness of fiscal austerity in highly-integrated economies. Closed-economy models overestimate its effectiveness, because they underestimate tax-base elasticities and ignore ...

We shed light on the function, properties and optimal size of austerity using the standard sovereign model augmented to include incomplete information about credit risk. Austerity is defined as the shortfall of consumption ...

"A number of recent studies regress a ""narratively"" identified measure of a macroeconomic shock directly on an outcome variable. In this note, we argue that this approach can be viewed as the reduced-form regression of ...

This paper investigates whether a fiscal stimulus implies a different impact for flexible and rigid labour markets. The analysis is done for 11 advanced OECD economies. Using quarterly data from 1999 to 2013, I estimate a ...