The Role of Financial Stress in the Sovereign Debt-Output Nexus, and in Economic Activity

Since the outbreak of the euro area crisis, the link between a country’s macroeconomic performance and the level of its sovereign debt has become a central topic in the economic debate. Now, the recent showdown in the U.S. Congress over raising the country’s debt ceiling has made this issue central once again, not only for […]

Credit or Demand Constraints? Why Investment Declined in the 2008/09 Recession

To overcome the recession following the financial crisis of 2007-09, US authorities have pursued ambitious policy measures aimed at maintaining the liquidity and solvency of the banking sector to ensure a steady flow of credit from financial markets to businesses. Despite these policy efforts business investment declined enormously in the aftermath of the financial meltdown […]