DiMartino Booth, Danielle, (2017), “The ECB Faces a Balance Sheet Dilemma”, BloombergView, 9 March Nature versus nurture. That philosophical debate is more pertinent than ever when it comes to the interventionist efforts of central banks that seek to will their economies back onto a sustainable growth path. But even the noblest of intentions can bump up against limitations when nature, in this case the free functioning of financial markets, is …Read More

Begg, Iain , (2017), “The Commission’s White Paper on the Future of Europe – a case of what might have been…”, EUROPP, 9 March Last week, the European Commission published its White Paper on the Future of Europe (WP), its attempt to set out the options for the development of the European Union. It explicitly rejects the narrow choice between more or less, offering instead a range of scenarios described as ‘neither mutually …Read More

Bentolila, Samuel, Pérez, Jose Ignacio García , Jansen, Marcel , (2017), “How to re-employ the Spanish long-term unemployed”, Vox Eu, 9 March One of the most tangible legacies of the Great Recession is a surge in the incidence of long-term unemployment, especially in Spain. This is not a new problem – as the title of the 1995 CEPR report, Spanish Unemployment: Is There a Solution?, attests (Andres et al. 1995) – …Read More

Emons, Ben, (2017), “The ECB’s ‘High-Class Problem’”, BloombergView, 7 March The European Central Bank has been in a difficult position when it comes to addressing inflation with conventional policy. The main reason is that, during the debt crisis, the bank faced a trade-off between stabilizing European sovereign bonds, consumer inflation and lending. Financial stress from sovereign bonds spilled over into the real economy and left the ECB with residual deflation, high …Read More

Fratzscher, Marcel, (2017), “Germany’s Misunderstood Trade Surplus”, Project Syndicate, 7 March Now that Germany’s current-account surplus has reached a record €270 billion ($285 billion), or close to 8.7% of GDP, the ongoing debate about its economic model has intensified. Eurozone politicians and Donald Trump’s administration in the United States are each blaming the other for the economic imbalance; and all are blaming the euro. Relevant Posts Merler, Sylvia, (2017), “Is Germany …Read More

Wishart, Ian, Rojanasakul, Mira, Fraher, John, (2017), “How the Euro Could Break Up—or Be Saved”, Bloomberg Politics, 7 March Talk about the breakup of the euro is fashionable again. With populists such as Marine Le Pen trying to storm the establishment and the popularity of the single currency in decline, executives and investors, including JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon, say nothing can be ruled out. At the …Read More

Darvas, Zsolt, Schoenmaker, Dirk , (2017), “Institutional investors and home bias in Europe’s Capital Markets Union”, Bruegel, March We highlight that existing indicators of equity home bias in the literature suffer from incomplete coverage because they consider only listed equities. We also consider unlisted equites and show that equity home bias is much higher than previous studies perceived. We also analyse home bias in debt securities holdings, and euro area …Read More

Buch, Claudia, Tonzer, Lena, Weigert, Benjamin ,(2017), “Assessing the effects of regulatory bank levies”, Vox Eu, 6 March Banking crises cause large costs to the economy (Reinhart and Rogoff 2011, 2013). Advanced economies are not immune to these costs. Here, the output losses due to financial crises have, on average, been one third of GDP (Laeven and Valencia 2013).1 Across emerging and advanced economies, unemployment increased on average by seven percentage …Read More

Heise, Michael, (2017), “Rewriting the Monetary-Policy Script”, Project Syndicate, 2 March The rule of thumb for monetary policymakers has long been that if inflation is below official target ranges, short-term interest rates should be set at a level that spurs spending and investment. This approach has meant that once interest rates reach or approach zero, central banks have little choice but to activate large asset-purchase programs that are supposed to stimulate …Read More