What future for central banking? Insights from the past
Ugolini, Stefano. While many central bankers feel they are now in unchartered territory, this column argues that history may provide guidance. Going back to a time before central banks, it argues that there are long-term cycles in the evolution of monetary policy – governments have alternatively internalised and externalised money creation. The key to success […]
Delivering growth while reducing deficits: lessons from the 1930s
Crafts, Nicholas. Conditions in the 1930s were very similar to those found today: interest rates were already low, the government deficit needed to come down, and the world economy was in disarray. Yet the UK economy grew by almost 20 per cent between 1933 and 1937. This success was built on the government announcing that prices […]
The group of G20: Trials of global governance in times of crisis
Angeloni, Ignazio. n spite of the disappointing outcome of some recent summits, notably the most recent in Cannes, the G20 is and should remain the cornerstone of the global financial architecture. Its record of performance in the last three years, reviewed in this paper, is mixed but not as unambiguously negative as critics have said. […]
Eurobonds are likely to increase the risk of joint defaults in the Eurozone
Wagner, Wolf. As government advisors and central bankers race through the different options to save the euro, this column argues that one such proposal, Eurobonds, will actually increase the risk that several Eurozone countries fail together. It shows using basic arithmetic that these bonds, sometimes labelled ‘stability bonds’, may actually be more likely to harm […]
Optimal taxation of top labor incomes: A tale of three elasticities
Piketty, Thomas Saez, Emmanuel & Stantcheva, Stefanie. As protesters occupy Wall Street and cities around the world decrying the disparity between the top 1% and the remaining 99%, CEPR DP8675 investigates the link between skyrocketing inequality and top tax rates in OECD countries. The authors find a strong correlation between tax cuts for the highest earners and […]
U.S. Futures and Out-of-Control Deficits
Eichengreen, Barry. Many Americans look at Europe’s financial crisis as something quite removed from their daily lives. But any assumptions that the same couldn’t play out in the United States itself are entirely misplaced, argues Barry Eichengreen, author of “Exorbitant Privilege.” Not only could it happen there, it could happen very quickly and rather dramatically, […]
Workers of the Western world
Freeland, Crystia. Branko Milanovic has some good news for the squeezed Western middle class — and also some bad news. Good news first: the past 150 years have been an astonishing economic victory for the workers of the Western world. The bad news is that workers in the developing world have been left out, and […]
The Draghi Deal
Mankiw, Greg. If I understand the news coming out of Europe correctly, the new head of the European Central Bank is offering a simple deal: If fiscal policy becomes hawkish, monetary policy will be dovish. In other words, as government spending is cut to put European governments on a sounder financial footing, monetary policy will do its best to ensure that any adverse […]
Agreement needed on liquidity provision to restore confidence in the eurozone
Micossi, Stefano. The multiple attempts to restore confidence in the eurozone over the 18 months that have passed since the first Greek rescue in May 2010, have clearly failed. Indeed, following each round of emergency measures agreed by the eurozone summits, matters have turned for the worse. This contribution by Stefano Micossi exhorts the leaders […]
Economics and Inequality
Arrow, Kenneth. The specific problems of the current U.S. economy—the drastic increase in unemployment and sluggish increase in output—overlay a tendency of much longer duration, a drastic and rapid increase in the inequality of income. Every economy of complexity produces an unequal distribution of the good things in life. But the period immediately following World […]