Amihud, Yakov, Favero, Carlo, (2016), “How to fix Italian banks”, Voxeu, 19 Ιουλίου The public debate over how to resolve the problem of Italian banks centres on whether there should be a government bailout, or whether banks’ bondholders should bear the burden. Absent from the discussion is what will happen to the banks’ stockholders, who should theoretically be wiped out before bondholders are asked to undergo a haircut. This column addresses the problem …Read More
The Return of Ireland’s Housing Bubble
Gerlach, Stefan, (2016), “The Return of Ireland’s Housing Bubble”, Project Syndicate, 14 Ιουλίου After having endured the collapse of its housing market less than a decade ago, Ireland has lately been experiencing a blistering recovery in prices, which already have risen in Dublin by some 50% from the trough in 2010. Is Ireland setting itself up for another devastating crash? Ιt’s no secret that the collapse of asset bubbles carries …Read More
Financing Vs. Spending Unions: How To Remedy The Euro Zone’s Original Sin
Palley, Thomas, (2016), “Financing Vs. Spending Unions: How To Remedy The Euro Zone’s Original Sin”, Social Europe, 14 Ιουλίου In economic policy, timing isn’t everything, it’s the only thing. The euro zone crisis has been evolving for over seven years, making it difficult to time policy proposals. Now, the shock of Brexit has created a definitive political opportunity for reforming rather than patching the euro. With that in mind, I …Read More
Sovereign and banking risk: Completing the union and breaking the loop
Navaretti, Giorgio Barba, Calzolari, Giacomo, Pozzolo, Alberto Franco, (2016), “Sovereign and banking risk: Completing the union and breaking the loop”, Voxeu, 15 Ιουλίου Eurozone countries are facing a stalemate in the completion of the Banking Union, at the heart of which is the regulation of banks’ sovereign exposures. This column introduces the latest issue of European Economy, which examines the interactions between banks and sovereign risk, the build up of sovereign risk during the crisis, …Read More
Designing effective automatic stabilisers of the business cycle
McKay, Alisdair, Reis, Ricardo, (2016), “Designing effective automatic stabilisers of the business cycle”, Voxeu, 14 Ιουλίου Brexit has raised the possibility of a recession on both sides of the Atlantic. Unable to use traditional remedies like monetary or fiscal policy stimulus, policymakers may consider automatic fiscal stabilisers. This column examines the impact of automatic stabilisers through social insurance on the business cycle, and how its impact can be used to mitigate recession. Unemployment …Read More
Euro Area At The Crossroads No Time For Complacency
IMF, (2016), “Euro Area At The Crossroads No Time For Complacency”, 8 Ιουλίου Recovery in the euro area has strengthened, but the medium-term outlook remains weak and is endangered by a lack of collective action to address common challenges. Members must rebuild faith in the monetary union, says the IMF in its latest review of the currency union. “The euro area is at a critical juncture. The progress made during the …Read More
Who’s Coming to the Rescue? Revenue-Sharing Slumps and Implicit Bailouts During the Great Recession
Foremny, Dirk, Solé-Ollé, Albert, (2016), “Who’s Coming to the Rescue? Revenue-Sharing Slumps and Implicit Bailouts During the Great Recession”, ZEW, Discussion Paper No. 16-049, Μάιος Local governments across the globe experienced high levels of fiscal stress during the last recession (Ter-Minassian and Fedelino, 2010). The causes of these fiscal imbalances were twofold. First, many local governments had to deal with a reduction in their own-source revenues, based as they were on taxes (most notably, …Read More
Fiscal Implications of Central Bank Balance Sheet Policies
Orphanides, Athanasios, (2016), “Fiscal Implications of Central Bank Balance Sheet Policies”, Centre for Economic Policy Research, Ιούλιος Under ordinary circumstances, the fiscal implications of central bank policies tend to be seen as relatively minor and escape close scrutiny. The global financial crisis of 2008, however, demanded an extraordinary response by central banks which brought to light the immense power of central bank balance sheet policies as well as their major …Read More
The reluctant defaulter: A tale of high government debt
Collard, Fabrice, Habib, Michel, Rochet, Jean-Charles, (2016), “The reluctant defaulter: A tale of high government debt”, Voxeu, 13 Ιουλίου Since the Global Crisis, sovereign debt levels have exploded in many OECD countries. This column presents a new measure of government debt – maximum sustainable debt. This measure takes account of the fact that a shortfall in growth naturally increases the probability of default, while allowing for the possibility of rollover. Applications to recent data suggest …Read More
Five Lessons from a Review of Recent Crisis Programs
Arora, Vivek, (2016), “Five Lessons from a Review of Recent Crisis Programs”, iMFdirect, 11 Ιουλίου IMF lending increased to unprecedented levels in the aftermath of the global financial crisis. As difficulties emerged, we extended financial support to countries across the world—in the euro area, Africa, Asia, the Middle East, and emerging economies in Europe. The IMF tried to draw lessons in real time as the crisis evolved in order to adapt our …Read More