This paper studies the interaction between epidemiological dynamics and the dynamics of economic activity in a demand-driven model in the structuralist/post-Keynesian tradition.

Germany’s sustained current-account surplus is not only bad for others in Europe and beyond—it is bad for almost all Germans too.

Upholding the EU fiscal rules at the elevated public debt level due to the Corona crisis would trigger a phase of long-standing austerity in the euro area. In this study, major proposals for reforms are reviewed, with a critical focus on the expenditure rule, which is central in many think-tanks’ and academic researchers’ advice.

According to our survey among the German labour force, school closures during the first wave of the COVID-19 crisis in the spring of 2020 have led to a relatively small impact on parents’ labour supply of only 0.4 percent of economy-wide working hours in April 2020 and June 2020. School closures are hence more of a long-term economic and social problem than a short-term labour supply shock.

Study finds public capital stocks throughout the EU to increase markedly due to RRF. In some hard-hit European countries, the RRF would offset a significant share of GDP lost during the pandemic. As gains in GDP much stronger in (poorer) southern and eastern European countries, RRF to potentially reduce economic divergence. All countries to experience lower public debt ratios over the next years.

I estimate fiscal reaction functions to analyze the cyclical behavior of discretionary measures in the euro area and the potential impact of changes in the fiscal framework. The core is to analyze whether fiscal rules have an asymmetric impact on discretionary measures over the cycle. First, results confirm the general perception that overall discretionary fiscal policy in the EMU is marginally procyclical. Procyclicality is, however, characterized by strong fiscal tightening in contractions while reactions in upturns are neutral. Second, fiscal rules marginally increase countercyclical policy responses in upturns, but strongly reinforce destabilizing procyclical polices in downturns. Interestingly, expenditure rules perform comparably better with regard to the stabilization objective than budget or debt rules.

On the 1st of July, Germany will take over the rotating EU-presidency. Besides the task of exiting the crisis caused by the pandemic as swiftly as possible, a number of important dossiers need to be pushed forward. They include the European Pillar of Social Rights, action on minimum wages and incomes, backing for national short-time working and unemployment schemes, and a larger EU budget with a stronger social component.

Europe's economic policy response to the crisis marks a step forward - if the Recovery Plan is implemented. However, investment in European public goods such as infrastructure and health is still lacking.

The Recovery Fund recently proposed by the EU Commission marks a sea-change in European integration. Yet it will not be enough to meet the challenges Europe faces. We propose a 10-year, €2 trillion investment programme focusing on public health, transport infrastructure and energy/decarbonisation. It would finance genuinely European projects so that the EU emerges stronger from the covid-19 crisis.

A novel hypothesis (due to Aghion et al.) says that imputations for disappeared products distort the officially measured price index. Using the German establishment history panel (BHP) we use the dynamic market-share approach and find an average value of about 0.5 annual percentage points of missing real growth rates, which agrees surprisingly well with the seminal literature.

The 3 and 60 percent deficit and debt caps came into the Maastricht Treaty 1992 by coincidence. There is no sound economic reasoning behind them. The Fiscal Compact (2011) has added a questionable rule for structural deficits and a problematic rule for the 7 high debt countries in the Euro area. More infrastructure investments, necessary for a Green New Deal, are restrained by the present fiscal rules.

A meta analysis of the literature shows that the elasticity of substitution between labor and capital is much lower (0.3) than standard models with a Cobb-Douglas production function assume (1.0) after controlling for publication bias. Labor and capital are complements, not substitutes. This also implies that monetary policy and cuts to corporate income taxes are less expansionary than standard models would predict.

A lab experiment on consumption and saving decisions, conducted with students at the University Duisburg-Essen shows that the sluggish consumption response to the currently low interest environment may be explained by precautionary motives or other preferences over wealth, which make consumers save more than a standard model would imply.

current proposals require only a minor modification, jointly guaranteed junior tranche would transform proposed structured bonds into a viable stability anchor for the Euro Area.