On 1 January 1999, the Economic and Monetary Union (EMU) entered into force and the euro came int... more On 1 January 1999, the Economic and Monetary Union (EMU) entered into force and the euro came into being. The European Central Bank (ECB) assumed responsibility for the monetary policy of a currency union made up of 11 countries and 293 million people. Today, the Eurozone includes 19 countries with a total population of 340 million. The euro has become the second currency used in world markets under any metric and has been seen as an anchor of economic and fi nancial integration. And yet, the euro is far from an unwavering success. The global fi nancial crisis of 2008 sent shockwaves around the world and proved to be the fi rst major test of the EMU. It exposed numerous architectural fl aws in the Union including the focus on limiting infl ation to close to two percent combined with the lack of a political mandate at the European level and the 'no bail-out' clause of the Maastricht Treaty. These and other obstacles hindered the EMU's handling of the crisis and prolonged its negative effects especially in periphery countries. In this Forum, we look back at the last 20 years since the euro's inception and consider the obstacles it has overcome and those that still lay in waiting, the design fl aws that have hindered it and how to address them as well as important lessons learned and recommendations for the future.
EU countries have seen large debt increases since the onset of the crisis. In most EU countries d... more EU countries have seen large debt increases since the onset of the crisis. In most EU countries debt is now at an unprecedented level, which has put some Member States under close financial markets scrutiny. As a consequence, a number of countries have had to adopt sizeable consolidation packages to cut deficits with a view to prevent debt ratios from rising further.
ABSTRACT Aggregated times series variables can be forecasted in different ways. For example, they... more ABSTRACT Aggregated times series variables can be forecasted in different ways. For example, they may be forecasted on the basis of the aggregate series or forecasts of disaggregated variables may be obtained first and then these forecasts may be aggregated. A number of forecasts are presented and compared. Classical theoretical results on the relative efficiencies of different forecasts are reviewed and some complications are discussed which invalidate the theoretical results. Contemporaneous as well as temporal aggregation are considered.
Neither the European Commission nor any person acting on behalf of the Commission is responsible ... more Neither the European Commission nor any person acting on behalf of the Commission is responsible for the use which might be made of this publication. Europe Direct is a service to help you find answers to your questions about the European Union Freephone number (*): 00 800 6 7 8 9 10 11 (*) Certain mobile telephone operators do not allow access to 00 800 numbers or these calls may be billed. A great deal of additional information on the European Union is available on the Internet.
AIII.2. Crisis containment and resolution policies (1970-2007) AIII.3. Correlation among differen... more AIII.2. Crisis containment and resolution policies (1970-2007) AIII.3. Correlation among different crises resolution measures (1970-2007) AIII.4. Exemplary calculations of output costs using the growth and level methods
"State aid to digital decoders: proportionality is needed to meet common interest"* 1. ... more "State aid to digital decoders: proportionality is needed to meet common interest"* 1. Introduction In December 2005 the Commission decided to open formal investigation proceedings on the…
In a world economy of overlapping generations with multiple countries, a competitive equilibrium ... more In a world economy of overlapping generations with multiple countries, a competitive equilibrium need not satisfy the condition that the balance of payments be in equilibrium. The requirement that, in addition to market clearing, a balance-of-payments equilibrium condition be satisfied selects Pareto-optimal allocations and guarantees the determinacy of equilibrium.
If the documents have been made available under an Open Content Licence (especially Creative Comm... more If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence.
How should multilateral trade policy be designed in a world in which countries differ in terms of... more How should multilateral trade policy be designed in a world in which countries differ in terms of market access and technology, and firms with market power differ in terms of productivity? We answer this question in a model of monopolistic competition in which variable markups increasing in firm size are a key source of misallocation across firms and countries. We use `disadvantaged' to refer to countries with smaller market size, worse state of technology (in terms of higher innovation and production costs), and worse geography (in terms of more remoteness from other countries). We show that, in a global welfare perspective, optimal multilateral trade policy should: promote the sales of low cost firms to all countries, but especially to disadvantaged ones; trim the sales of high cost firms to all countries, but especially to disadvantaged ones; reduce firm entry in all countries, but especially in disadvantaged ones. This would not only restore efficiency but also reduce welfare inequality between advantaged and disadvantaged countries if their differences in market size, state of technology and geography are large enough.
Monopolistic competition and optimum product selection: why and how heterogeneity matters. Resear... more Monopolistic competition and optimum product selection: why and how heterogeneity matters. Research in Economics.
Economic Papers are written by the Staff of the Directorate-General for Economic and Financial Af... more Economic Papers are written by the Staff of the Directorate-General for Economic and Financial Affairs, or by experts working in association with them. The Papers are intended to increase awareness of the technical work being done by staff and to seek comments and suggestions for further analysis. The views expressed are the author's alone and do not necessarily correspond to those of the European Commission.
This paper presents the proceedings of the annual Public Finance Workshop organised by the Direct... more This paper presents the proceedings of the annual Public Finance Workshop organised by the Directorate-General for Economic and Financial Affairs in Brussels on 19 January 2016 in relation with the publication of its Public Finance in EMU 2015 Report. After the double-dip recession between 2009 and 2013, growth is gradually returning to the EU and the euro area but it is still subject to downside risks. On the nominal side, both inflation and interest rates remain very low, thereby curtailing the stabilisation function of monetary policy. After years of fiscal consolidation, budget deficits have been reduced significantly in most Member States. Nevertheless, the crisis has taken its toll on the societies of several Member States and left us with the legacy of high public-debt ratios and increased social challenges. The workshop discusses the best options for fiscal policy in such an environment. It was organised in two sessions: Session 1: "Fiscal policy in a low-inflation context", and Session 2: "Fiscal policy after the crisis". The proceedings display the high quality contributions that were presented in each of these sessions and the discussions that followed.
ABSTRACT In economies of overlapping genenrations, competitive equilibrium allocations and intere... more ABSTRACT In economies of overlapping genenrations, competitive equilibrium allocations and interest rates may be indeterminate. In a world economy with multiple countries, a competitive equilibrium need not satisfy the condition that the balance of payments be in equilibrium. In a stationaryeconomy with heterogeneous countries, the requirement that, in addition to market clearing, a balance of payments equilibrium condition be satisfied restores the determinacy of equilibrium; and it may select the monetary steady-state equilibrium.
On 1 January 1999, the Economic and Monetary Union (EMU) entered into force and the euro came int... more On 1 January 1999, the Economic and Monetary Union (EMU) entered into force and the euro came into being. The European Central Bank (ECB) assumed responsibility for the monetary policy of a currency union made up of 11 countries and 293 million people. Today, the Eurozone includes 19 countries with a total population of 340 million. The euro has become the second currency used in world markets under any metric and has been seen as an anchor of economic and fi nancial integration. And yet, the euro is far from an unwavering success. The global fi nancial crisis of 2008 sent shockwaves around the world and proved to be the fi rst major test of the EMU. It exposed numerous architectural fl aws in the Union including the focus on limiting infl ation to close to two percent combined with the lack of a political mandate at the European level and the 'no bail-out' clause of the Maastricht Treaty. These and other obstacles hindered the EMU's handling of the crisis and prolonged its negative effects especially in periphery countries. In this Forum, we look back at the last 20 years since the euro's inception and consider the obstacles it has overcome and those that still lay in waiting, the design fl aws that have hindered it and how to address them as well as important lessons learned and recommendations for the future.
EU countries have seen large debt increases since the onset of the crisis. In most EU countries d... more EU countries have seen large debt increases since the onset of the crisis. In most EU countries debt is now at an unprecedented level, which has put some Member States under close financial markets scrutiny. As a consequence, a number of countries have had to adopt sizeable consolidation packages to cut deficits with a view to prevent debt ratios from rising further.
ABSTRACT Aggregated times series variables can be forecasted in different ways. For example, they... more ABSTRACT Aggregated times series variables can be forecasted in different ways. For example, they may be forecasted on the basis of the aggregate series or forecasts of disaggregated variables may be obtained first and then these forecasts may be aggregated. A number of forecasts are presented and compared. Classical theoretical results on the relative efficiencies of different forecasts are reviewed and some complications are discussed which invalidate the theoretical results. Contemporaneous as well as temporal aggregation are considered.
Neither the European Commission nor any person acting on behalf of the Commission is responsible ... more Neither the European Commission nor any person acting on behalf of the Commission is responsible for the use which might be made of this publication. Europe Direct is a service to help you find answers to your questions about the European Union Freephone number (*): 00 800 6 7 8 9 10 11 (*) Certain mobile telephone operators do not allow access to 00 800 numbers or these calls may be billed. A great deal of additional information on the European Union is available on the Internet.
AIII.2. Crisis containment and resolution policies (1970-2007) AIII.3. Correlation among differen... more AIII.2. Crisis containment and resolution policies (1970-2007) AIII.3. Correlation among different crises resolution measures (1970-2007) AIII.4. Exemplary calculations of output costs using the growth and level methods
"State aid to digital decoders: proportionality is needed to meet common interest"* 1. ... more "State aid to digital decoders: proportionality is needed to meet common interest"* 1. Introduction In December 2005 the Commission decided to open formal investigation proceedings on the…
In a world economy of overlapping generations with multiple countries, a competitive equilibrium ... more In a world economy of overlapping generations with multiple countries, a competitive equilibrium need not satisfy the condition that the balance of payments be in equilibrium. The requirement that, in addition to market clearing, a balance-of-payments equilibrium condition be satisfied selects Pareto-optimal allocations and guarantees the determinacy of equilibrium.
If the documents have been made available under an Open Content Licence (especially Creative Comm... more If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence.
How should multilateral trade policy be designed in a world in which countries differ in terms of... more How should multilateral trade policy be designed in a world in which countries differ in terms of market access and technology, and firms with market power differ in terms of productivity? We answer this question in a model of monopolistic competition in which variable markups increasing in firm size are a key source of misallocation across firms and countries. We use `disadvantaged' to refer to countries with smaller market size, worse state of technology (in terms of higher innovation and production costs), and worse geography (in terms of more remoteness from other countries). We show that, in a global welfare perspective, optimal multilateral trade policy should: promote the sales of low cost firms to all countries, but especially to disadvantaged ones; trim the sales of high cost firms to all countries, but especially to disadvantaged ones; reduce firm entry in all countries, but especially in disadvantaged ones. This would not only restore efficiency but also reduce welfare inequality between advantaged and disadvantaged countries if their differences in market size, state of technology and geography are large enough.
Monopolistic competition and optimum product selection: why and how heterogeneity matters. Resear... more Monopolistic competition and optimum product selection: why and how heterogeneity matters. Research in Economics.
Economic Papers are written by the Staff of the Directorate-General for Economic and Financial Af... more Economic Papers are written by the Staff of the Directorate-General for Economic and Financial Affairs, or by experts working in association with them. The Papers are intended to increase awareness of the technical work being done by staff and to seek comments and suggestions for further analysis. The views expressed are the author's alone and do not necessarily correspond to those of the European Commission.
This paper presents the proceedings of the annual Public Finance Workshop organised by the Direct... more This paper presents the proceedings of the annual Public Finance Workshop organised by the Directorate-General for Economic and Financial Affairs in Brussels on 19 January 2016 in relation with the publication of its Public Finance in EMU 2015 Report. After the double-dip recession between 2009 and 2013, growth is gradually returning to the EU and the euro area but it is still subject to downside risks. On the nominal side, both inflation and interest rates remain very low, thereby curtailing the stabilisation function of monetary policy. After years of fiscal consolidation, budget deficits have been reduced significantly in most Member States. Nevertheless, the crisis has taken its toll on the societies of several Member States and left us with the legacy of high public-debt ratios and increased social challenges. The workshop discusses the best options for fiscal policy in such an environment. It was organised in two sessions: Session 1: "Fiscal policy in a low-inflation context", and Session 2: "Fiscal policy after the crisis". The proceedings display the high quality contributions that were presented in each of these sessions and the discussions that followed.
ABSTRACT In economies of overlapping genenrations, competitive equilibrium allocations and intere... more ABSTRACT In economies of overlapping genenrations, competitive equilibrium allocations and interest rates may be indeterminate. In a world economy with multiple countries, a competitive equilibrium need not satisfy the condition that the balance of payments be in equilibrium. In a stationaryeconomy with heterogeneous countries, the requirement that, in addition to market clearing, a balance of payments equilibrium condition be satisfied restores the determinacy of equilibrium; and it may select the monetary steady-state equilibrium.
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Papers by Matteo Salto