Category Archives: Research papers

New research paper on cross-country fiscal policy spillovers and capital-skill complementarity published

A new research paper by Thomas Davoine and Matthias Molnar (IHS) has been published:

Thomas Davoine & Matthias Molnar: Cross-country fiscal policy spillovers and capital-skill complementarity in currency unions. IHS Economics Series, Working Paper No. 329.

We investigate cross-country fiscal policy spillovers through the integration of capital markets in a currency union and allow capital use in production to differ across countries. Following empirical evidence, we assume that production exhibits capital-skill complementarity. Using a multi-country overlapping-generations model calibrated for 14 European Union countries, we find that output spillovers are small with standard tax reforms but can be sizeable with large government spending increases financed by taxes: long run output losses in shock-free countries can amount to a quarter of the losses in countries hit by the spending shock. Conditional and temporary relaxing of the EU debt ceiling rule could benefit the Union as a whole.


FIRSTRUN researchers’ articles published in the National Institute Economic Review

The current issue of the National Institute Economic Review* features several articles by FIRSTRUN researchers.

Simon Kirby (NIESR):
Economic Policy and Surveillance in Europe: Introduction

Iain Begg (LSE):
Fiscal and Other Rules in EU Economic Governance: Helpful, Largely Irrelevant or Unenforceable?

Tero Kuusi (Etla):
Does the Structural Budget Balance Guide Fiscal Policy Pro-Cyclically? Evidence from the Finnish Great Depression of the 1990s

Tomáš Domonkos, Filip Ostrihon, Ivana Šikulová, Mária Širanová (IER):
Analysing the Relevance of the MIP Scoreboard’s Indicators


Also see a related article by Jan in’t Veld (DG ECFIN):
A Public Investment Stimulus in Surplus Countries and Its Spillovers in the EA


*) The National Institute Economic Review is the quarterly publication of the National Institute of Economic and Social Research, one of Britain’s oldest and most prestigious independent research organisations.

National Institute Economic Review, founded in 1959, provides a vehicle for publishing and promoting high quality research and debate on economic and related social issues.

National Institute Economic Review, Volume 239, Issue 1, February 2017.

New discussion paper on international correlation of business cycles

A new discussion paper by Paul De Grauwe and Yuemei Ji on international correlation of business cycles has been published by the Centre for Economic Policy Research:

Also see their column “Synchronisation in business cycles: An endogenous explanation” at VoxEU:

A CeLEG Working Paper “One EMU Fiscal Policy for the EURO” published

A preliminary version of LUISS’s deliverable on fiscal policy coordination has been published as a CeLEG Working Paper. It will be reviewed and updated before delivering the final version for the FIRSTRUN project at the end of August 2016.

Alexandre Lucas Cole, Chiara Guerello and Guido Traficante (2016). One EMU Fiscal Policy for the EURO. CeLEG Working Paper Series No. 02/16.

The authors welcome comments and feedback:
Alexandre Lucas Cole:
Chiara Guerello:
Guido Traficante:

Iain Begg, Annette Bongardt, Kalypso Nicolaidis and Francisco Torres on EMU and sustainable integration

This paper considers what will be required to make Economic and Monetary Union (EMU) sustainable following the successive crises of recent years. It starts by laying out the policy benchmark, namely the successive ‘President Reports’ produced by EU institutions. It then suggests three dimensions of sustainable integration relevant to EMU, namely the pursuit of sustainable growth, the need to take into account what we call ‘varieties of modernisation’ and the ‘ownership’ of democratically sustainable reforms. It then evaluates the recasting of EMU governance against the benchmark of sustainable integration.

Iain Begg, Annette Bongardt, Kalypso Nicolaidis & Francisco Torres (2015), EMU and Sustainable Integration. Journal of European Integration, Volume 37, Issue 7, 2015, pages 803-816.

Tero Kuusi: The Finnish Great Depression of the 1990s: Soviet Trade or Home-Made?

This paper reconsiders the reasons for the Finnish Great Depression.The paper argues that during the crisis Finland experienced institutional adjustments that are largely neglected by the current literature, and argues that both financial and tax shocks may have contributed to the crisis more than it has been previously suggested. It is shown by using a general equilibrium model that together these factors can generate a large and widespread fall in key macroeconomic variables, whereas the results suggest that the direct impact of the collapse of the Soviet Union may not have been as large as suggested before.

Kuusi, Tero (23.9.2015). “The Finnish Great Depression of the 1990s: Soviet Trade or Home-Made?”. ETLA Working Papers No 32.