Gros, Daniel, (2017), “Why keeping the balance sheet of the Federal Reserve constant is equivalent to a gradual exit”, Vox Eu, 12 June When interest rates are at the zero lower bound, the stance of monetary policy is judged by the size of the balance sheet of the central bank. However, this is not quite correct since one part of the balance sheet is determined by the demand for cash, which …Read More
Infrastructure in Greece-Funding the future
PwC, (2017), “Infrastructure in Greece-Funding the future”, March In Greece, the infrastructure investments were affected by the deep economic recession. The infrastructure investment gap is between 0.8 pp of GDP (against the European average) or 1.4 pp of GDP (against historical performance) translating into 1.1% or € 2bln new spending per year. Infrastructure investments have an economic multiplier of 1.8x** which can boost demand of other sectors. The construction sector will …Read More
Monetary-fiscal interactions and the euro area’s malaise
Jarociński, Marek, Maćkowiak, Bartosz, (2017), “Monetary-fiscal interactions and the euro area’s malaise”, ECB, June 2017 When monetary and fiscal policy are conducted as in the euro area, output, inflation, and government bond default premia are indeterminate according to a standard general equilibrium model with sticky prices extended to include defaultable public debt. With sunspots, the model mimics the recent euro area data. We specify an alternative configuration of monetary and fiscal …Read More
The Study Europe’s Rate-Setters Should Read
Giugliano, Ferdinando, (2017), “The Study Europe’s Rate-Setters Should Read”, Bloomberg View, 8 June A key argument for hurrying up with a monetary tightening is that negative rates have hurt bank profitability, restricting lenders’ ability to give credit to families and firms. But is it really the case? How low can interest rates go before they become a drag on the economy? A new way of thinking about this problem comes from …Read More
Charting the next steps for the EU financial supervisory architecture
Véron, Nicolas, (2017), “Charting the next steps for the EU financial supervisory architecture”, Bruegel, June The combination of banking union and Brexit justifies a reform of the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) in the near term, in line with the subsidiarity principle. The other EU-level financial authorities, namely the European Insurance and Occupational Pensions Authority (EIOPA), European Systemic Risk Board (ESRB), Single Resolution Board …Read More
Europe (Finally) Shows How to Deal With a Failing Bank
Bloomberg View, (2017), “Europe (Finally) Shows How to Deal With a Failing Bank”, 8 June Credit where credit’s due: The sale for 1 euro of Banco Popular Espanol SA, a failing Spanish bank, to rival lender Banco Santander SA shows how the euro zone should handle such cases. The regulators acted swiftly and fairly. Global markets barely noticed. This is a model for future interventions. Banco Popular’s troubles date back to …Read More
A Pilot for the Governance of the Euro Is Required Immediately
Perrut, Dominique, (2017), “A Pilot for the Governance of the Euro Is Required Immediately” , EconoMonitor, 8 June After the Brexit, European leaders are faced with the strict obligation to make Europe credible, particularly by consolidating the weak pillar of the Euro, namely, economic governance. This must henceforth be piloted by a Finance Minister. This step, which is necessary for the survival of the Euro, must be taken by the European …Read More
Europe’s Central Bank Is the World’s Most Important
Hatheway, Larry, (2017), “Europe’s Central Bank Is the World’s Most Important”, Bloomberg View, 7 June Over the next two weeks, investors will focus on monetary policy ahead of the European Central Bank meeting on June 8, which will be followed by the Federal Reserve on June 13-14. After a disappointing U.S. jobs report for May and amid signs of a regulatory crackdown on Chinese credit growth, fissures are appearing in …Read More
How Theresa May’s ‘Brexit election’ strategy backfired
Merrick, Jane, (2017), “How Theresa May’s ‘Brexit election’ strategy backfired”, CNN, 9 June It was supposed to be the Brexit Election. When Theresa May announced back in April she was calling a risky snap election, three years before it was necessary, she invited British voters to increase her Conservative government’s majority and give her the strengthened mandate she needed to go into Brexit talks and get a good deal for the …Read More
GDP up by 0.6% in both the euro area and the EU28
Eurostat/GDP up by 0.6% in both the euro area and the EU28/9 June 2017 Seasonally adjusted GDP rose by 0.6% in both the euro area (EA19) and the EU28 during the first quarter of 2017, compared with the previous quarter, according to an estimate published by Eurostat, the statistical office of the European Union. In the fourth quarter of 2016, GDP grew by 0.5% and 0.6% respectively. Compared with the same …Read More