This year we have seen a paper by Cogan, Cwik, Taylor and Wieland, from Stanford University, and another by Christiano, Eichenbaum and Rebelo, from Northwestern University, both based on the same “workhorse”, the Smets and Wouters’ stochastic dynamic general equilibrium model, showing opposite results: the former argue the multiplier is below one, whereas for the latter, it is above one. Why such differences?
The tide of the global financial crisis and the sovereign debt crisis has long fallen, but its poisonous legacy and geopolitical tensions are fuelling distrust, fears and even prejudices once thought long buried. The European construction is at a standstill while progress is badly needed in the key areas, where the Union is better at prohibiting things than at getting them done.