Reichlin, Lucrezia, Vallée, Shahin, (2016), “Resolving Europe’s Banking Crisis in Italy”, Project Syndicate, 14 Οκτωβρίου The European banking sector is crippled and highly fragmented. Though its problems are more acute for some countries and financial institutions, the sector runs on a level of profitability that is, on average, lower than its cost of equity and maintains a stock of non-performing loans and hard-to-value assets large enough to undermine its capitalization for years …Read More
The Blind Side of Public Debt Spikes
Jaramillo, Laura, Mulas-Granados, Carlos, Kimani, Elijah, (2016), “The Blind Side of Public Debt Spikes”, IMF Working Paper, October What explains public debt spikes since the end of WWII? To answer this question, this paper identifies 179 debt spike episodes from 1945 to 2014 across advanced and developing countries. We find that debt spikes are not rare events and their probability increases with time. We then show that large public debt spikes …Read More
Countering a regressive and illiberal Europe
A. Emmanouilidis, Janis, Zuleeg, Fabian, (2016), “Countering a regressive and illiberal Europe”, European Policy Centre, 13 Οκτωβρίου After the Brexit vote and the collective failure to predict the impending earthquake and ‘sign of times’, it would be a mistake to carry on as if nothing had happened. Although the UK is undoubtedly a special case, there is a need to reflect more fundamentally on the state of European integration and …Read More
Reflections on the natural rate of interest, its measurement, monetary policy and the zero lower bound
Cukierman, Alex, (2016), “Reflections on the natural rate of interest, its measurement, monetary policy and the zero lower bound”, VoxEu, 15 Οκτωβρίου The decline in long-term interest rates has nurtured the view of a persistent shift of the natural rate into negative territory. This column argues that existing estimates of the natural rate, based on the New Keynesian model, are likely to be biased downward. It makes a case for …Read More
Keeping policy rates persistently low: Implications for the monetary transmission mechanism
Garriga, Carlos, Kydland, Finn, Šustek, Roman, (2016), “Keeping policy rates persistently low: Implications for the monetary transmission mechanism”, VoxEu, 16 Οκτωβρίου Central banks responded to the financial crisis by cutting policy rates to prevent deflation and curb the decline in economic activity, but these responses have been anything but temporary. This column explores whether the sticky price channel is still relevant in an environment of persistently low rates. Although the …Read More
Firm Performance and (Foreign) Debt Financing before and during the Crisis: Evidence from Firm-Level Data
Gabrijelčič, Mateja, Herman, Uroš, Lenarčič, Andreja, (2016), “Firm Performance and (Foreign) Debt Financing before and during the Crisis: Evidence from Firm-Level Data“, ESM Working Paper Series, July We study the effects of financial leverage and foreign financing on firm performance before and during the recent crisis, using a large panel of Slovenian companies. We find a significant negative impact of leverage on firm performance, even when we explicitly control for the reverse causality between …Read More
ECB bank supervision cannot tackle debt restructuring single-handedly
Lehmann, Alexander, (2016), “ECB bank supervision cannot tackle debt restructuring single-handedly”, Bruegel, 13 Οκτωβρίου The European Central Bank has begun to tackle a key symptom of banking sector fragility with its proposed guidelines on banks’ management of non-performing loans (NPLs). But detailed targets for the reduction of NPLs and prescriptions for the internal governance and management of distressed assets also represent a new style of more intrusive supervision. For the …Read More
Fiscal crises as pretexts for quantitative easing
Reis, Ricardo, (2016), “Fiscal crises as pretexts for quantitative easing”, VoxEu, 14 Οκτωβρίου Conventional economic theory predicts that, outside of a financial crisis, quantitative easing should have no effect on real outcomes or inflation. This column proposes two theoretical channels through which quantitative easing might also work in a fiscal crisis. In this case, quantitative easing can be a valuable tool because it can control the path of inflation over …Read More
Europe after Merkel
Mody, Ashoka, (2016), “Europe after Merkel”, Project Syndicate, 13 Οκτωβρίου Next year, Germany will hold a federal election, and the new Bundestag will choose the country’s next chancellor. Whether or not Angela Merkel retains the role – at the moment, things are not looking good for her or her Christian Democratic Union (CDU) – one thing is certain: Germany’s chancellor will no longer be de facto Chancellor of Europe. That will …Read More
International Monetary Fund Annual Report 2016
International Monetary Fund, (2016), “International Monetary Fund Annual Report 2016”, IMF, Σεπτέμβριος The year was marked by difficult challenges and milestone achievements. To reinvigorate modest growth at a time of uncertainty about a complicated global economy, the IMF membership endorsed a three-pronged approach of monetary, fiscal, and structural policies to get the world economy back on a stronger and safer growth track. Highlights of the IMF’s work during the year …Read More