Why the ECB refuses to be a Lender of Last Resort
De Grauwe, Paul. The euro has a matter of weeks to save itself, with several institutions now preparing for its collapse. Given this, why does the ECB still refuse to bail out Europe’s heavily indebted countries? This column provides an explanation. It says that the ECB may well be behaving rationally but adds that such […]
Occupy Economics
Folbre, Nancy. The Occupy Wall Street movement, displaced from some key geographic locations, now enjoys a small but significant encampment among economists. Concerns about the impact of growing economic inequality fit neatly into a larger critique of mainstream economic theory and its deep faith in the efficiency of markets. Πηγή: The New York Times πλήρες […]
Growth from international capital flows: The role of volatility regimes
Mody Ashoka, Murshid, Antu Panini. Recent commentary has suggested that capital inflows – long considered a positive for growth – may actually be doing more harm than good. This column presents new evidence reinforcing the conventional interpretation. It finds that volatility is the determining factor. With volatility below a threshold, an inflow of foreign capital promotes […]
Sovereign debt, government myopia, and the financial sector
Acharya, Viral, Rajan, Raghuram. Why do governments repay external borrowing? This column argues that myopic governments seeking popularity do not default when they are poor because they would lose access to debt markets and be forced to reduce spending. And they do not default when rich because of the adverse consequences to the domestic financial […]
How Iceland survived the fire
Wolf, Martin. Iceland was the first country devastated by the financial crisis. Lehman Brothers failed on September 15 2008. By October 9, its three big banks – Glitnir, Landesbanki and Kaupthing – had collapsed. The UK government seized Landesbanki UK under anti-terror laws, while Gordon Brown, the prime minister, threatened to seize Icelandic assets in […]
The Wages of Economic Ignorance
Skidelsky, Robert. Politicians are masters at “passing the buck.” Everything good that happens reflects their exceptional talents and efforts; everything bad is caused by someone or something else. The economy is a classic field for this strategy. Three years after the global economy’s near-collapse, the feeble recovery has already petered out in most developed countries, […]
Does openness generate growth? Reconciling the experiences of Mexico and China
Kehoe, Timothy, Ruhl, Kim. In 1985, Mexico opened itself to trade and investment. In recent years, China has followed the same path with much more impressive results. But this column argues that the slow growth and crises that Mexico experienced after the initial boom should act as a warning to those optimistic about China. Πηγή: Voxeu […]
An Open Letter to Dr Jens Weidmann
Wyplosz, Charles. The EZ crisis is approaching a tipping point beyond which market panic and slow government reaction threaten to create a generation-defining loss of jobs, savings, and pensions. This open letter to the president of the German central bank presents arguments that counter German objections to using the Eurozone’s last remaining defence against economic […]
Speculative Attacks within or outside a Monetary Union: Default versus Inflation (what to do today)
Gros, Daniel. In this analytical policy brief, CEPS Director Daniel Gros explores whether there is a fundamental difference between a formal sovereign default with a haircut and debt monetisation, which reduces the purchasing power for investors by the same amount. He argues that there is indeed a difference because a formal sovereign default invariably leads […]
Who cares about the survival of the eurozone?
De Grauwe, Paul. De Grauwe expresses astonishment in this new Commentary at the continued insistence in both Brussels and Frankfurt on budgetary austerity as the necessary and sufficient response to stop the government debt crisis in the eurozone. In his view, the austerity programmes should be softened and spread over a longer period of time, […]