Cut the Spending, Spare the Poor
Jean Pisani-Ferry. Why do some governments spend more than others? The question is more complicated than it appears, especially in the case of European governments. The answer may look obvious when comparing, say, Denmark (where public spending, excluding interest payments on debt, amounted to 58% of GDP in 2012) and the United States (where the […]
Why hasn’t Japan’s massive government debt wreaked havoc (yet)?
Yuji Horioka, Charles, Nomoto, Takaaki & Terada-Hagiwara, Akiko. Japan’s sovereign debt-to-GDP ratio is higher than any country in Europe and more than twice the OECD average. This column explains why Japan’s massive government debt did not wreak havoc in the past. Robust domestic saving and a temporary inflow of foreign capital caused by the Global Crisis […]
How did the Global Financial Crisis misalign East Asian currencies?
Eiji Ogawa, Zhiqian Wang. Since the East Asian financial crisis of 1997, the emphasis on regional monetary cooperation has grown. This column discusses recent research into intra-regional exchange rate misalignments. In the aftermath of the Global Financial Crisis, investors in the US and Europe withdrew from emerging markets, causing a depreciation of emerging-market currencies against […]
Multilateralising 21st-century regionalism
Baldwin, Richard. The global value chain revolution has changed trade and trade agreements. Trade now matters for making goods as well as selling them. Trade governance has shifted away from the WTO towards megaregional agreements. This column argues that 21st-century regionalism is not fundamentally about discrimination, and that its benefits and costs are best thought […]
Larry Summers’ interest rate conundrum
Mayer, Thomas. Larry Summers has attracted much attention recently for invoking old theories of secular stagnation to explain the persistence of low interest rates in the recent past. The German economist Carl Christian von Weizsäcker has pointed to a retirement savings glut as the cause for low rates. In the view of Thomas Mayer, however, […]
GDP and life satisfaction: New evidence
Eugenio Proto, Aldo Rustichini. The link between higher national income and higher national life satisfaction is critical to economic policymaking. This column presents new evidence that the connection is hump-shaped. There is a clear, positive relation in the poorer nations and regions, but it flattens out at around $30,000–$35,000, and then turns negative. Πηγή: Voxeu […]
Why fiscal sustainability matters
Willem, Buiter. Fiscal sustainability has become a hot topic as a result of the European sovereign debt crisis, but it matters in normal times, too. This column argues that financial sector reforms are essential to ensure fiscal sustainability in the future. Although emerging market reforms undertaken in the aftermath of the financial crises of the […]
The Eurozone: If only it were the 1930s
Crafts, Nicholas. This column argues that the legacy of public debt resulting from the crisis in the Eurozone is a serious threat. Both the size of the problem and the options to address it make life much more difficult for policymakers than was the case in the late 1930s after the collapse of the gold standard. […]
Saving the Euro: A Pyrrhic Victory?
Crafts, Nicholas. The survival of the euro has entailed a lengthy recession and has left an ominous legacy of public debt, but the fundamental flaws in its original design have not been corrected. In the 1930s the collapse of the Gold Standard was an integral part of the recovery process from the Great Depression, but […]
The impossible trinity, yet again
Grenville, Stephen. The views and theories on the impossible trinity are conflicting. This column discusses some of the theories and their potential drawbacks. It points out that the impossible trinity has policy relevance for advances economies because their currencies are often close substitutes, and exchange rates follow expectations. For emerging economies, however, the policies implied […]