Post the great financial crisis (GFC) of 2008–2009, there has been a surge in the macroeconomics literature on aggregate uncertainty. Although the recent literature has recognized the adverse real effects of global uncertainty shocks in emerging market economies (EMEs), the role of monetary policy in offsetting these adverse effects and their link with the exchange rates is not explored in the literature. We find that the currently followed interest rate rules (IRRs) under a flexible inflation-targeting regime are ineffective in stabilizing the domestic economy during periods of high global uncertainty in the EMEs. Using a small open economy new Keynesian DSGE model with Epstein–Zin preferences and second-moment demand shocks, we compare and propose alternate monetary policy rules that significantly reduce welfare losses. We find that the best monetary policy rule in terms of welfare depends on the nature of shock that is, first-moment or second-moment shock.

Over the past decade, the most salient changes in macroeconomic conditions in developed economies have included rising government debt and population aging, which are strongly correlated with each other. This paper investigates fiscal multipliers by disentangling the effects of population aging from those of government debt. Our analysis, which uses heterogeneous panel data from 24 OECD economies, shows that while fiscal policy is ineffective for economies with high-debt levels, it is effective for economies with low-debt levels. Furthermore, the estimation results reveal that fiscal policy is ineffective for aged economies, regardless of the level of government debt. However, for nonaged economies, while fiscal policy leads to negative effects on output in times of high debt, its positive effects are more pronounced in times of low debt. Our results suggest that, for the effective implementation of fiscal stimulus policies, policy-based stimulation of employment in the labor market is essential.

The paper estimates public consumption multipliers and whether they vary depending on the slack of the economy. To this aim, linear and smooth-transition panel local projections are applied to a data set composed of quarterly data on nine selected Euro area countries for the period 1999Q1−2018Q4. The results show that the linear multiplier is approximately 1.3 and so above unity. This is, however, an “average result” as clear evidence is found in favor of state dependency. Particularly, the findings indicate that the multiplier is approximately 2.0 in the slack regime, while it is below 0.5 in the good regime. These results are robust along several dimensions, such as alternative measures of slack and controlling for fiscal foresight. Some linear and state-dependent transmission channels are also investigated.

This paper aims to estimate the government investment fiscal multipliers in select European countries for the period 1970–2016. To do this, we combine Structural Vector Autoregression (SVAR) modeling with the Local Projections (LP) approach. We estimate models by also controlling for fiscal foresight, excluding the postcrisis period and distinguishing between Northern and Southern countries. Our findings suggest that an increase in government investment generates a “Keynesian effect” by engendering positive and permanent effects on the GDP level, even when government expenditure expectations are considered. Fiscal multipliers are close to 1 on impact and increase in the years after the implementation of a discretionary fiscal policy.

The footwear industry in southern Europe has faced several periods of strong crisis since the 1970s. This paper analyzes these crises and the resilience strategy developed by the sector in Italy, Spain, and Portugal, the major producing countries. Although many common features are observed in the three countries, both in the chronology and the nature of the crises and in the measures to overcome the difficulties, significant differences in the characteristics of the industry and the behavior of the companies are also appreciated. These differences have determined the degree of resilience of the sector in each country.

It has repeatedly been shown that properly constructed monetary aggregates based on index number theory (such as Divisia money) vastly outperform traditional measures of money (i.e. simple sum money) in empirical models. However, opponents of Divisia frequently claim that Divisia is “too complex” for little gain. And indeed, at first glance it looks as if simple sum and Divisia sum exhibit similar dynamics. In this paper, we want to build deeper understanding of how and when Divisia and simple sum differ empirically using monthly US data from 1990M1 to 2007M12. In particular, we look at how they respond differently to monetary policy shocks, which seems to be the most essential aspect of those differences from the perspective of the policy maker. We use a very rich, fairly agnostic setup that allows us to identify many potential nonlinearities, building on a smoothed local projections approach with automatic selection of the relevant interaction terms. We find, that—while the direction of change is often similar—the precise dynamics differ sharply. In particular in times of economic uncertainty, when the proper assessment of monetary policy is most relevant, those existing differences are drastically augmented.