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The recent surge in energy prices in Europe and their high volatility, have a very large impact on its economy. Policymakers have sought to counteract the impacts of the unprecedented energy price shock with a plethora of measures albeit with limited success. This paper proposes a dynamic, flexible system of energy price regulation at the retail level. The mechanism is simple, automatic and has a number of parameters that can be adjusted to fine tune its execution. It is shown how the mechanism leads to toppling of energy prices and reduces their volatility. At the same time, it does not prevent energy prices to absorb long-run fundamental/ market-conform price trends. [ABSTRACT FROM AUTHOR]

This paper develops and estimates a small macroeconomic model of the Russian economy. The model is tailored to analyse the impact of the oil price, the exchange rate, private sector confidence and fiscal policy on economic performance. Simulations suggest that the Russian economy is vulnerable to downward oil price shocks. We substantiate two mechanisms that mitigate the economic effects of oil price shocks, namely the stabilisation brought by the Oil Stabilisation Fund and the Dutch disease effect. The fiscal policies of the Putin administration temper economic fluctuations caused by oil price shocks. doi:10.1057/ces.2009.2 Keywords: Russia, oil price, macroeconomic modelling, Oil Stabilisation Fund JEL Classifications: C70, E17, E58, E16, E63, INTRODUCTION Russia is the largest neighbour of the enlarged European Union (EU). The economies of the EU and Russia are increasingly integrated through rising flows of goods, services, capita! and [...]

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jpolmod.2007.05.013 Byline: Cindy Moons (a), Harry Garretsen (b)(c), Bas van Aarle (c)(d), Jorge Fornero (a)(e) Keywords: Fiscal policy; Monetary policy Abstract: This paper analyzes monetary policy in a stylized New-Keynesian model. A number of issues are focused upon: (i) optimal monetary policy under commitment or discretion versus ad-hoc monetary policy based on simple rules, (ii) the effects of fiscal policies and foreign variables on monetary policy, (iii) the effects of fiscal deficit and interest rate smoothing objectives and the role of forward-backward linkages in the model. The model is estimated for the Euro Area. Using simulations of the estimated model, it is analyzed how these aspects might affect monetary policy of the ECB and macroeconomic fluctuations in the Euro Area. Author Affiliation: (a) University of Antwerp, Department of Applied Economics, Prinsstraat 13, 2000 Antwerpen, Belgium (b) Utrecht School of Economics, Utrecht University, The Netherlands (c) CESifo, Munich, Germany (d) Department of Economics, University of Maastricht, The Netherlands (e) Europainstitut Wirtschaftsuniversitaet Wien, Althanstrasse 39-45, 1090 Wien, Austria Article History: Received 1 March 2006; Revised 1 January 2007; Accepted 1 May 2007

This paper studies the experiences with fiscal adjustments in the European Union (EU) countries during the transition period to the Economic and Monetary Union (EMU). Using several approaches suggested in the literature on fiscal adjustments and their macroeconomic effects and in the literature on EMU, we analyze the effects of the fiscal adjustments during this period on private consumption. Thereby, we also take the specific context of the transition towards EMU explicitly into consideration. At best mixed evidence for the presence of non-linearities in the relation between fiscal adjustments and private spending is obtained. The sensitivity of the results for a number of factors is also checked. JEL classification: E32; F43 Keywords: Fiscal retrenchment; EMU

This paper studies the interaction between the excessive deficits procedure of the Maastricht Treaty and the fiscal stablization policies of the Economic and Monetary Union, as well as how a fiscal transfer mechanism between members affects them.

This paper focuses on the possibility that financial markets require risk premia on holding sovereign debt of countries that appear vulnerable from a fiscal sustainability perspective. Both the level of debt as well as the rate of change of debt are assumed to impact on the risk premium. We analyze the impact of such an endogenous risk premium in a simple debt game between a monetary and a fiscal player, as introduced by [Tabellini (1986) Journal of Economic Dynamics and Control 10, 427–442]. The risk premium term adds a nonlinearity to the linear model in case risk premia are absent. We analyze outcomes in case of noncooperative open-loop Nash strategies and in case of cooperative strategies and consider the workings of the risk premium as a market-based disciplining device (in case of high debt) and adjustment rewarding device (in case of a declining debt trajectory). [ABSTRACT FROM AUTHOR]

This paper analyses the effects of structural reform and fiscal consolidation policies in the Euro Area using a stylized new-Keynesian model. A number of issues are focused upon: (i) the modelling and effects of fiscal consolidation and structural reforms, and (ii) evaluation of alternative reform and consolidation scenarios, including their joint implementation. [ABSTRACT FROM AUTHOR]

This paper develops a stylized budgeting framework to analyze the effects of macroeconomic shocks and government bond market conditions on public finances. We focus on the impacts of primary fiscal balance shocks, growth, and interest rate shocks on budgetary sustainability. We consider the effects of financial sector bailouts, uncertainty about aging costs and instability viz. speculation in government bond markets. The framework is applied to the case of Belgium, where recently these issues have played an important role. A scenario analysis of budgetary adjustment under alternative hypotheses is carried out to analyze Belgian fiscal sustainability over the next 20 years. [ABSTRACT FROM AUTHOR]

This paper studies the institutional design of the coordination of macroeconomic stabilization policies within a monetary union in the framework of linear quadratic differential games. A central role in the analysis plays the partitioned game approach of the endogenous coalition formation literature. The specific policy recommendations in the European Economic and Monetary Union (EMU) context depend on the particular characteristics of the shocks and the economic structure. In the case of a common shock, fiscal coordination or full policy coordination is desirable. When anti-symmetric shocks are considered, fiscal coordination improves the performance but full policy coordination does not produce further gains in policymakers' welfare. [ABSTRACT FROM AUTHOR]

This paper studies the design and effects of monetary and fiscal policy in the euro area. To do so, a stylized two-region model of monetary and fiscal policy rules in the EMU is built. We analyse how monetary and fiscal rules affect the adjustment dynamics in the model. Both the effects on the individual countries and on the EMU aggregate economy are studied. Three aspects play an important role in the analysis: (i) the consequences of alternative monetary and fiscal policy rules, (ii) the consequences of asymmetries between EMU countries (asymmetries in macroeconomic shocks and macroeconomic structures), and (iii) the role of alternative degrees of backward- and forward-looking behaviour in consumer decisions and inflation expectations. [ABSTRACT FROM AUTHOR]

This paper analyzes the effects of macroeconomic shocks in the Economic and Monetary Union (EMU) using a stylized two-country model. First, it is shown how asymmetries between countries might matter in terms of the resulting business cycle fluctuations. More specifically, country-specific shocks are allowed for as well as cross-national differences in wage behavior. Second, it is shown by means of numerical simulations how national and federal fiscal stabilization policies can be used to dampen business cycle fluctuations in various (a)symmetric settings. The main innovation of the paper is to illustrate how structural differences between countries help to determine the impact of macroeconomic shocks and the effectiveness of fiscal policy. [ABSTRACT FROM AUTHOR]

Economic and political uncertainty, high inflation and liberalization of foreign exchange restrictions have encouraged substantial currency substitution in the economies in transition. This paper presents empirical evidence on currency substitution in four Eastern European countries in transition: Poland, Hungary, Romania and Bulgaria. It is shown how currency substitution affects money demand and by that seignorage revenues. The empirical estimates of the money demand functions are used to calculate the seignorage maximizing rate of inflation in the economies in transition. [ABSTRACT FROM PUBLISHER]

Discusses European Commission's Single Market Programme aimed at removing all barriers to trade and foreign direct investment in the European Union. Status of international trade in the European Union; Macroeconomic conditions for the stimulation of the foreign direct investments; Causal relation between trade and foreign direct investments.