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MEDEA
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Fiscal Policies in the Euro Area
The issue of the size of fiscal spillovers in the euro area has gained prominence recently, given proposals to coordinate fiscal policies that aim at achieving an appropriate “aggregate fiscal stance”, consistent with economic and monetary policy conditions. Given the heterogeneous fiscal positions of member states, such stance would be achieved by fine-tuning policies of countries with enough fiscal space. Appealing as they are, such proposals have so far been based on limited empirical evidence. On the one hand, the literature based on calibrated/estimated general equilibrium models tends to find that fiscal spillovers within the euro area are small once all channels are considered (tr...
Bemod
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Micro-based Estimates of Heterogeneous Pricing Rule
This paper presents US and euro area estimates for a fully heterogeneous model, in which there is a continuum of fi rms setting prices with a constant probability of adjustment, which may differ from fi rm to fi rm. The estimated model accurately matches the empirical distribution function of individual price durations for the US and the euro area. Incorporating these micro based pricing rules into a DSGE model, we fi nd that nominal shocks have a greater real impact in the fully heterogeneous economy than in the standard Calvo model. We also fi nd that nominal and real shocks bring about a reallocation of resources among sectors. Monetary policy is found to have a greater real impact in the euro area than in the United States. [Resumen de autor]
