Abstract:
The financial crisis in 2007/2008 marked the end of the Great Moderation in economies across the globe. Since then, many different new macroeconomic realities have emerged pertaining to the euro area (EA). This dissertation studies three of them, all distinct, but equally important for policy making.
First, the financial crisis had significant impact on public finances both in emerging and advanced economies such as the EA. Credit conditions have diverged and interest rate spreads on sover-eign bonds increased in particular in advanced economies potentially leading to real macroeco-nomic effects. We examine this issue more rigorously in Chapter 1 of this dissertation. Further-more, the financial crisis has hit economies differently, not only with respect to public finances but also regarding real macroeconomic effects like unemployment, compare for instance the EA. In this context, in Chapter 2 we analyze whether and how labor migration can mitigate these adverse effects of business cycle fluctuations and thereby contribute to risk sharing in a currency union such as the US or the EA. Lastly, advanced economies have experienced a decade of low and stable inflation after the financial crisis in contrast to what economists and policy makers ex-pected. Thus, in Chapter 3 we take a closer look at inflation, particularly in the EA, and revisit the well-known Phillips curve. In doing so, we study whether the trade-off between inflation and un-employment still exists and what this means for the current high-inflation environment.
In sum, this dissertation highlights three distinct but intertwined new macroeconomic realities that have emerged in the aftermath of the financial crisis over the last decade. Hopefully, the findings presented here can contribute to a better understanding of each phenomenon individually as well as their joint macroeconomic significance.
Empirical Macroeconomics