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Are OECD policy recommendations for public sector reform biased against welfare states? Evidence from a new database

Bergh, Andreas, Dackehag, Margareta, Rode, Martin, “Are OECD policy recommendations for public sector reform biased against welfare states? Evidence from a new database”, European Journal of Political Economy, 20 September Policy advice by the OECD has long been at the heart of academic debates on welfare state reform, with frequent claims questioning the ideological orientation of recommendations. This paper constructs an indicator of perceived reform need for 24 countries, quantifying the policy advice contained in …Read More

Relationship and Transaction Lending in a Crisis

Bolton, Patrick, Freixas, Xavier, Gambacorta, Leonardo,  Mistrulli, Paolo Emilio, (2016), “Relationship and Transaction Lending in a Crisis”, The Review of Financial Studies, 7 June We study how relationship lending and transaction lending vary over the business cycle. We develop a model in which relationship banks gather information on their borrowers, allowing them to provide loans to profitable firms during a crisis. Because of the services they provide, operating costs of relationship banks are higher than those of …Read More

The European VAT Oxymoron: A pragmatic solution for welfare, especially in times of crisis?

Alexandris Polomarkakis, Konstantinos, (2016), “The European VAT Oxymoron: A pragmatic solution for welfare, especially in times of crisis?”, Journal of International and Comparative Social Policy, 26 August VAT is an important but at the same time long neglected issue in social policy literature. The way in which taxes are levied has important implications for citizens in terms of equity and efficiency effects. Rate diversification is embedded in VAT planning across …Read More

Debt Dilution and Sovereign Default Risk

Hatchondo, Juan Carlos, Martinez, Leonardo, Sosa-Padilla, César, (2016), “Debt Dilution and Sovereign Default Risk”, Journal of Political Economy, 31 August We measure the effects of debt dilution on sovereign default risk and study debt covenants that could mitigate these effects. We calibrate a baseline model with endogenous debt duration and default risk (in which debt can be diluted) using data from Spain. We find that debt dilution accounts for 78 percent of the …Read More

Size and composition of public investment, sectoral composition and growth

Felice, Giulia, (2016), “Size and composition of public investment, sectoral composition and growth”, European Journal of Political Economy, September After providing some descriptive evidence on the relationship between the size and composition of public expenditure and the sectoral employment composition of the economy, this paper develops an endogenous growth model with two private sectors, where the government provides, as pure public goods, both infrastructure investment, directly affecting the productivity of private capital …Read More

New perspectives on the Great Depression: a review essay

S. Tavlas, George,(2016), “New perspectives on the Great Depression: a review essay”, Bank of Greece, 16 September The Great Depression was the most devastating and destructive economic event to afflict the global economy since the beginning of the twentieth century. What, then, were the origins of the Great Depression and what have we learned about the appropriate policy responses to economic depressions from that episode? This essay reviews two recently …Read More

Bank interest rate setting in the euro area during the Great Recession

Camba-Mendez, Gonzalo, Durré, Alain, Mongelli, Francesco Paolo , (2016), “Bank interest rate setting in the euro area during the Great Recession”, ECB Working Paper Series, 16 September This paper sheds light on how recent financial tensions in the euro area were ultimately reflected in bank interest rate setting. We make two new contributions. First, we develop a theoretical model capturing banks financing and the rate setting choices. Banks in the model …Read More

Different lessons For Europe from American financial history–a counterpoint to Mr. Gaspar

Kincaid, G. Russell, (2016), “Different lessons For Europe from American financial history–a counterpoint to Mr. Gaspar”, Journal of European Integration, 2 September Sovereign debt restructuring played a key role in placing the US federal government on a sound financial footing under its new Constitution in 1789. State governments in the US, like national governments in the euro area, do not have bankruptcy protection. US state governments have not defaulted since the …Read More

The six flaws of the Eurozone

Wyplosz, Charles, (2016), “The six flaws of the Eurozone”, Economic Policy, 4 August When it was created, it was reasonable to think that the architecture of the monetary union was not perfect. It was also likely that the imperfections would lead to difficulties, possibly even crises. This article identifies six flaws, most of which had been identified even before the launch of the euro. It starts by pinpointing why the Eurozone, …Read More

The ECB’s asset purchase programme: an early assessment

Andrade, Philippe, Breckenfelder, Johannes, De Fiore, Fiorella, Karadi, Peter, Tristani, Oreste, (2016),  “The ECB’s asset purchase programme: an early assessment”, ECB Working Paper Series, 9 September This paper analyses the effects of the European Central Bank’s expanded asset purchase programme (APP) on yields and on the macroeconomy, and sheds some light on its transmission channels. It shows, first, that the January 2015 announcement of the programme has significantly and persistently reduced …Read More