The first section analyses recent developments in cross-border capital flows into and out of euro area Member States. Between 2008 and the summer of 2012 – when the ECB announced its OMT programme – a substantial proportion of cross-border financial flows was taken over by official financing by central banks or governments. Since the summer of 2012, net private financial flows have resumed, while official flows have generally come down, a sign of regained confidence in the euro area. However, the analysis of gross financial flows also indicates that the strong dynamics of cross-border financial asset acquisition observed in pre-crisis years has yet to return.

The second section looks at the movement of workers between EU countries from the perspective of economic adjustment. The analysis shows that monetary unification in Europe was followed by an increase in the responsiveness of labour mobility to unemployment differences and to asymmetric demand shocks.

The third section discusses housing taxation from an efficiency and equity standpoint, highlighting the fiscal and macroeconomic consequences of current tax rules. It focuses on the economic distortions generated by exemptions and relief measures for owner-occupied housing and on tax breaks for mortgage interest payments.

The last section analyses the weakness of investment in the euro area since the start of the crisis. The complex dynamic relationship between investment and other macroeconomic variables is assessed via a relatively large Bayesian VAR model of 26 macroeconomic variables. The analysis confirms that the weakness of investment is mostly due to the very low level of growth in the recent past (a strong accelerator effect), relatively high real interest rates, and ongoing deleveraging in the private sector.