4Non-technical summary 5

Over the past 10 years dynamic stochastic general equilibrium (DSGE) models have become an important tool in quantitative macroeconomics. However, DSGE models were not considered as a forecasting tool until very recently. The objective of this paper is twofold. First, we compare the forecasting ability of a canonical DSGE model for the Spanish economy with other standard econometric techniques. More precisely, we compare out-of-sample forecasts obtained from different estimation methods of the DSGE model with the forecasts produced by a VAR and a Bayesian VAR. Second, we propose a new method for combining DSGE and VAR models (in what we have called Augmented VAR-DSGE) through the expansion of the variable space where the VAR operates with artificial series obtained from a DSGE model. The results indicate that the out-of-sample forecasting performance of the proposed method is capable of competing with all the considered alternatives, and thus even a simple canonical RBC model contains useful information that can be used for forecasting purposes.We would like to thank J. Pérez and two anonymous referees for very useful comments and suggestions.

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Abstract. Fiscal harmonization among the European Union member states is a goal involving major di¢ culties for its implementation. Each country faces a particular trade-o¤ between …scal revenues generated by taxation and the productive e¢ ciency loss induced by their respective tax code. This paper provides a quantitative measure of these trade-o¤s for a number of taxes and the European Union member states using a dynamic general equilibrium model with public inputs. Calibration of the model for the EU-15 member states provides the following results: i) the maximum tax revenue level is not far from the current tax levels for most countries; ii) the cases of Sweden, Denmark and Finland are anomalous, as productive e¢ ciency can be gained by lowering tax rates without a¤ecting …scal revenues; iii) in general, countries would obtain e¢ ciency gains without changing …scal revenues by reducing the capital tax and increasing the labor tax; and iv) capital tax harmonization to the average capital tax rate can be done with quite small changes in both …scal revenues and output for most countries.JEL Classi…cation Numbers: E62, H20, H30.

Given a production economy, we define union games by considering strategic behavior of the suppliers of factors. We refer to the Nash equilibria of this game as union equilibria. We analyze situations where the unemployment of factors is supported as a union equilibrium. The degree of unemployment depends on technological conditions. This allows us to model a source of unemployment which differs from the usual sources provided in the literature. We state a limit result that demonstrates that, as the market power of unions decreases, the corresponding sequence of union equilibria converges to the Walrasian equilibrium, that is, to full employment of factors. We also provide some examples that illustrate the main results. Copyright Springer-Verlag Berlin/Heidelberg 2006Union games, Unemployment, Walrasian equilibrium, Manipulability.,