QE and ultra-low interest rates: Distributional effects and risks
There is widespread consensus that the conventional and unconventional monetary policies that world’s major central banks implemented in response to the global financial crisis prevented a deeper recession and higher unemployment than there otherwise would have been. These measures, along with a lack of demand for credit as a result of the recession, contributed to […]
Inflation expectations and the missing disinflation
Olivier Coibion, Yuriy Gorodnichenko. During the Great Recession, advanced economies have not experienced the disinflation that has historically been associated with high unemployment. This column shows that using consumers’ (as opposed to forecasters’) inflation expectations restores the traditional Phillips curve relationship for recent years. Consumers’ inflation expectations are more responsive to oil prices than those […]
Are exchange rates predictable?
Rossi, Barbara. Predicting exchange rates is still an inexact science. Economic models perform poorly, and a plethora of alternative methods have been attempted. This column guides the reader through the state of the art, reviewing various predictors, models, and data specifications. Despite a large and divergent literature chasing this holy grail, the toughest benchmark remains […]
The comparative performance of fixed and flexible ER regimes
Cohen-Setton, Jérémie. Andrew Rose recently published a provoking paper, which shows that the choice of the exchange rate regime has had little influence on economic outcomes in the Great Recession. While the empirical analysis of the paper excludes EMU countries, this result has challenged the consensus that life outside the euro would have been easier for […]
Finance and growth: Too much of a good thing?
Beck, Thorsten. A well-functioning financial system is critical for economic growth. However, some studies find a negative relationship between the two at high levels of financial development. This column discusses why this is the case and suggests some policy implications. It argues that reforms that refocus the financial system on enterprise credit and on internalising the […]
Unemployment, labour-market flexibility and IMF advice: Moving beyond mantras
Blanchard, Olivier, Jaumotte, Florence & Loungani, Prakash. The state of labour markets in advanced economies remains dismal despite recent signs of growth. This column explains the IMF’s logic behind the advice it provided on labour markets during the Great Recession. It argues that flexibility is crucial both at the micro level, i.e. on worker reallocation, and […]
Five On The Floor
Krugman, Paul We’re coming up on the fifth anniversary of an important moment: the point at which US interest rates hit the zero lower bound, and we entered a liquidity trap. Five years! Yet many people, even many economists, are still in denial over what that means. Πηγή: The New York Times πλήρες κείμενο
Tax policy in (and for) hard times
Keen, Michael. Fiscal consolidation, and public concern that its pain be fairly spread, is putting tax systems under considerable pressure. This column takes stock of how they have been faring, and how they could do better. Πηγή: Voxeu πλήρες κείμενο
Proposal for a Stabilisation Fund for the EMU
Delbecque, Bernard. This paper argues that it should be possible to complement Europe’s Economic and Monetary Union with an insurance-type shock absorption mechanism to increase the resilience of member countries to economic shocks and reduce output volatility. Such a mechanism would neither require the establishment of a central authority, nor would it lead to permanent […]
Mind the gap! And the way structural budget balances are calculated
Darvas, Zsolt. he so-called structural balance of the general government aims to measure the ‘underlying’ position of the budget by excluding the impact of the economic cycle and one-off measures, like bank recapitalisation costs. It has a crucial role in designing fiscal consolidation strategies in the EU (see the Annex at the end). Late September, […]