Some economists consider that austerity policies are crucial for controlling sovereign debt and once they are under control, appropriate market conditions can generate enough private investment to help foster economic activity. This scenario would lead to higher economic growth and lower unemployment rates. This is the main argument for structural reforms implemented in the European economy after the 2008-2009 recession. In this session the effects of the stabilization policies that have been implemented in the Eurozone for the core, the peripheral and the Eastern countries will be analyzed. As Stiglitz noted, the results of these policies have caused inequality between groups and some of periphery economies have achieved higher levels of unemployment rates and lower output. A crucial question, where there is also no consensus concerns the relationship between public debt and economic growth, both theoretically and empirically. In this session we will present an alternative methodology to test causality. This method considers the presence of several structural breaks which can be approximated by smooth breaks in the Flexible Fourier Form VAR. We will show its utility for the evaluation of macroeconomic policies, in practice. Moreover, the effects of the stabilization policies referred to above will be evaluated in a broader context than the European one. First, we will discuss the effect of the accession of new members to the Economic Monetary Union on foreign direct investment using a structural gravity model taking into account unobserved bilateral heterogeneity, multilateral resistance, and heteroscedastic residuals, among other characteristics. In addition, it will be interesting to examine the “euro effect” considering both the extensive and intensive margins. Additionally, thanks to a multi-country analysis, we will consider the role played by emerging economies in the European external sector. Our case-study will focus on the Chinese economy. Until recently, China was the world’s fastest-growing major economy. It should have achieved a relevant improvement in the standard of living. Nevertheless, the level of per capita income is far from most developed economies. Because of that, it is crucial to quantify the effects of the implementation of public provision of social services. In particular, using a Computable General Equilibrium model we will assessed the impact, not only on the Chinese economy, but also on Eastern Asia and seven regions of the world economy and in different productive sectors.