Intra-euro rebalancing is inevitable but insufficient
Darvas, Zsolt. Greece, Portugal and Spain face a serious risk of external solvency due to their close to minus 100 percent of GDP net negative international investment positions, which are largely composed of debt. The perceived inability of these countries to rebalance their external positions is a major root of the euro crisis. Πηγή: Bruegel […]
Reflections on the curious contrast of public policies between Germany and the US: Real estate versus human capital
Aizenman, Joshua, Noy, Ilan. In the years leading up to the global crisis, the US focused on subsidising home ownership, whereas Germany placed much more emphasis on education and vocational training. While it is easy to think that this explains the subsequent performance of the two economies, this column provides some much needed economic analysis. Πηγή: […]
Fiscal policy in developing countries: Escape from procyclicality
Frankel, Jeffrey, Vegh, Carlos & Vuletin, Guillermo. With the ongoing financial turmoil in Europe, many emerging market countries are now deemed less risky than so-called “advanced” countries. This column examines why this is the case and finds that the cyclicality of a country’s fiscal policy – a sign of its riskiness – is inversely correlated with the […]
Graduation from monetary policy procyclicality
Vegh, Carlos, Vuletin, Guillermo. How do emerging markets move from procyclical fiscal and monetary policies to countercyclical ones? This column argues that a key ingredient is stronger institutions. Start and stop, procyclical macroeconomic policies have been a chronic policy problem for emerging markets. Expansionary in good times and contractionary in bad times, booms become unmanageable credit […]
Making sense of Eurobond proposals
Claessens, Stijn, Mody, Ashoka & Vallee, Shahin. The Eurozone debate is awash with proposals for mutualising national debt. This column summarises and evaluates the main proposals – suggesting how they might be combined in a five-year path to a fiscal union. It stresses that short-term stability objectives will only work if they help to advance the agenda […]
ECB limited and conditional lending is not ‘what it takes’
Ghezzi, Piero. The ECB president, Mario Draghi, said he’d do “whatever it takes to save the euro”. This column asks what ‘whatever it takes’, means and whether the ECB is prepared to go that far. It argues that limited and conditional lending improves the odds of success but it is not the game changer needed. […]
To stabilize the Eurozone, the ECB must set aside its fears and start buying governments’ bonds
De Grauwe, Paul. Government bond markets in Europe remain volatile, with Spanish and Italian bond rates at near unsustainable levels. Paul De Grauwe argues that the only institution that can stabilize these markets by buying government bonds is the European Central Bank (ECB). The ECB must now overcome its risk averse nature and take advantage […]
Dos and Don’ts for the European Central Bank
Feldstein, Martin.Recent statements by European Central Bank President Mario Draghi and Bank Governor Ewald Nowotny have reopened the debate about the desirable limits to ECB policy. The issue is not just the ECB’s legal authority under the Maastricht Treaty, but, more importantly, the appropriateness of alternative measures.Πηγή: Project Syndicate πλήρες κείμενο
Internal Devaluation, Inflation, and the Euro
Krugman, Paul. I’ve been writing for a long time about how the euro area needs more inflation. But I suspect that many readers don’t quite see how this ties into the macro story. So here’s something that may or may not clear things up — a stylized little model linking euro inflation and the adjustment […]
Welcome to the ECB
Wyplosz, Charles. Financial markets once again pushed Eurozone leaders to act. European Central Bank President Draghi recently promised to “do whatever it takes”. This column argues that Draghi made an implicit commitment to act as lender of last resort to Eurozone governments. This means optimism may be justified – if only because it suggests that […]