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A Decentralised Fiscal Stimulus Is The Right Answer To The EMU’s Problems

Fazi, Thomas, Iodice, Guido, (2016), “A Decentralised Fiscal Stimulus Is The Right Answer To The EMU’s Problems”, Social Europe, 9 November The global financial crisis exposed the euro’s original sin of depriving member states of their fiscal autonomy without transferring this spending power to a higher authority. This left member states utterly defenceless in the face of economic crises such as the 2008 booms-gone-bust. Yet, the crisis didn’t bring about, as one …Read More

The Skills Delusion

Turner, Adair, (2016), “ The Skills Delusion”, Social Europe, 7 November Everybody agrees that better education and improved skills, for as many people as possible, is crucial to increasing productivity and living standards and to tackling rising inequality. But what if everybody is wrong? Relevant Posts Kai Liua, Kjell G. Salvanes, Erik Ø. Sørensen, (2016), “Good skills in bad times: Cyclical skill mismatch and the long-term effects of graduating in …Read More

Big Danger at the Lower Bound

Rogoff, Kenneth, (2016), “Big Danger at the Lower Bound”, Project Syndicate, 2 November Markets nowadays are fixated on how high the US Federal Reserve will raise interest rates in the next 12 months. This is dangerously shortsighted: the real concern ought to be how far it could cut rates in the next deep recession. Given that the Fed may struggle just to get its base interest rate up to 2% …Read More

The New Fiscal Reality

Pisani-Ferry, Jean, (2016), “The New Fiscal Reality”, Project Syndicate, 1 November “When the facts change, I change my mind. What do you do, sir?” This, reportedly, is how Keynes replied to the criticism that he had changed his position on the policy response to the Great Depression. Pragmatism of this sort is not that common: policy views are often characterized by considerable inertia. Too frequently, today’s perspectives remain shaped by …Read More

The New View of fiscal policy and its application

Furman, Jason, (2016), “The New View of fiscal policy and its application”, VoxEu, 2 November The landscape of the fiscal policy debate has changed over the past decade, with academics and international organisations moving away from an ‘Old View’ of fiscal policy as ineffective. This column uses examples from the US and Europe to highlight the five principles of a ‘New View’ of fiscal policy, which increasingly appreciates that expansionary …Read More

Central Banks and the Revenge of Politics

Otmar Issing, (2016), “Central Banks and the Revenge of Politics”, Project Syndicate, 1 November The reputation of central banks has always had its ups and downs. For years, central banks’ prestige has been almost unprecedentedly high. But a correction now seems inevitable, with central-bank independence becoming a key casualty. Relevant Posts Shen, Dennis, (2016), “Central banks are facing a crisis of confidence – it’s time to reinvent global monetary policy”, LSE …Read More

Investment for Sustainable Growth

D.Sachs, Jeffrey, (2016), “Investment for Sustainable Growth”, Project Syndicate, 31 October The big disappointment in the world economy today is the low rate of investment. In the years leading up to the 2008 financial crisis, growth in high-income countries was propelled by spending on housing and private consumption. When the crisis hit, both kinds of spending plummeted, and the investments that should have picked up the slack never materialized. This …Read More

Understanding bank payouts during the financial crisis of 2007-2009

Cziraki, Peter, Laux, Christian, Lóránth, Gyöngyi, (2016), “Understanding bank payouts during the financial crisis of 2007-2009”, VoxEu, 26 October Banks’ payout decisions at the beginning of the financial crisis of 2007-2009 were particularly controversial as the crisis eroded the capital of many banks. Concerns were raised that banks may have engaged in wealth transfer to shareholders, or that they may have been reluctant to reduce dividends to avoid negative signalling. …Read More

Taking Monetary Policy to the People

Davies, Howard, (2016), “Taking Monetary Policy to the People”, Project Syndicate, 25 October For the last 20 years, central-bank independence has marked a kind of “end of history” for monetary policy, after many other regimes were tried and failed. In the years before the 2008 global financial crisis, independent central banks were seen as successful in controlling inflation; and countries with sizable fiscal deficits were especially enthusiastic about central-bank independence …Read More

Should we rethink fiscal policy?

Merler, Silvia, (2016), “Should we rethink fiscal policy?”, Bruegel, 24 October What’s at stake: there has been quite some discussion recently on whether we should rethink the framework of fiscal policy in order to make it more appropriate and effective in a world where demand seems to be chronically anemic, inflation is low and the interest rates are likely to stay close to zero (if not negative) for a long …Read More