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Abstract

This paper analyses the impact of the Global Financial Crisis on the Euro area utilizing a simple dynamic macroeconomic model with interaction between monetary policy and �fiscal policy. The model consists of an IS curve, a Phillips curve, a term structure relation, a debt
accumulation equation and a Taylor monetary policy rule supplemented with a Zero Lower Bound, and a fi�scal policy rule. The model is calibrated/estimated for EU-16 countries
for the period 1980Q1{2009Q4. The impact of the Global Financial Crisis is studied by means of impulse responses following a combined, prolonged aggregate demand and public
debt shock. The simulation mimicking the GFC turns out to work fairly well. However, the required size of the shock is quite large.

Item Type:	Report (Discussion Paper)
Authors/Creators:	He, X and Jacobs, J and Kuper, G and Ligthart, J
Keywords:	repec; Global Financial Crisis; euro area; monetary policy; �fiscal policy; New Neoclassical Synthesis model; Zero Lower Bound
Publisher:	University of Tasmania
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