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The case for an active fiscal policy

Ubide, Ángel, (2016), “The case for an active fiscal policy”, VoxEU, 11 Οctober The pre-crisis consensus was, and remains, very strong – the business cycle would be managed by monetary policy, while fiscal policy would focus solely on debt sustainability. In a world of zero interest rates, however, fiscal policy has to contribute to supporting aggregate demand and protecting against deflationary risks. This column outlines three ways in which a well-designed expansionary …Read More

Big Bad Actors: A Global View of Debt

Gaspar, Vitor, Moreno Badia, Marialuz, (2016), “Big Bad Actors: A Global View of Debt”, iMF Direct, 5 October In the midst of the Great Depression, the American economist Irving Fisher warned of the dangers of excessive debt and the deflationary pressures that follow on its tail. He saw debt and deflation as the big, bad actors. Now, their close relatives—too high debt and too low inflation—are still in play, at …Read More

GDP growth — is it “good enough” or does it distort policymaking?

Graham, Carol, (2016), “GDP growth — is it “good enough” or does it distort policymaking?”, Brookings, 5 Οctober Today, standard benchmarks of progress, productivity, job quality, and democracy are being upended. Income-based measures such as gross domestic product (GDP) served us well for decades, yet when GDP counts pollutant-generating economic activity on the positive side of the balance sheet, or when it fails to measure unpaid labor activity, it falls short. …Read More

Central banks are facing a crisis of confidence – it’s time to reinvent global monetary policy

Shen, Dennis, (2016), “Central banks are facing a crisis of confidence – it’s time to reinvent global monetary policy”, LSE Europpblog, 6 October Since the financial crisis, central banks have taken on a far more significant role in economic management. But with diminishing returns of and unintended consequences from existing policies, monetary policy now faces a crisis of confidence. Dennis Shen explores policy innovations that could support global central banks battling …Read More

What we really know about the global financial safety net

Scheubel, Beatrice, Stracca, Livio, (2016), “What we really know about the global financial safety net”, VoxEu, 4 Οctober The global financial safety net is one of the key infrastructures of financial globalization. However, its current constellation does not reflect a coherent design, but rather the interaction of different instruments used for different purposes and developed over time. This column presents the first database that brings together all of the relevant …Read More

What Deutsche Bank’s Troubles Tell Us about the Health of Europe’s Banking System

Jacob Funk Kirkegaard, (2016), “What Deutsche Bank’s Troubles Tell Us about the Health of Europe’s Banking System”, Peterson Institute for International Economics, 30 September The stock of Germany’s largest bank, Deutsche Bank, is currently trading at multi-decade lows and the bank is edging closer to suffering a general crisis of confidence, which could see investors pull their business from the bank and even depositors wanting their money out. We are not …Read More

Crisis-proof services

Ariu, Andrea, (2016), “Crisis-proof services”, VoxEU, 3 Οctober Following the failure of Lehman Brothers in September 2008, trade in goods experienced the steepest decline ever recorded, with both exports and imports dropping four times more than income (Freund 2009, Levchenko et al. 2010). The fall was severe, highly synchronised across countries, and mostly concentrated in the category of durable goods (Baldwin 2009). Surprisingly, trade in services was relatively unaffected by the …Read More

The Italian Non-Performing Loans Problem And Europe

Minenna, Marcello, (2016), “The Italian Non-Performing Loans Problem And Europe”, Social Europe, 30 September The narrative about Eurozone problems is often – and rightly – focused on the Italian banks’ troubles, burdened as they are by €338 billion of non-performing loans (NPLs) with little or no chance of recovery owing to the persistent crisis of the Italian manufacturing sector. The Monte dei Paschi drama is just the tip of the iceberg: …Read More

The Perils of Debt Complacency

Reinhart, Carmen, (2016), “The Perils of Debt Complacency”, Project Syndicate, 28 September “What a government spends the public pays for. There is no such thing as an uncovered deficit.” So said John Maynard Keynes in A Tract on Monetary Reform. But Robert Skidelsky, the author of a magisterial three-volume biography of Keynes, disagrees. In a recent commentary entitled “The Scarecrow of National Debt,” Skidelsky offered a rather patronizing narrative, in a …Read More

The objectives of financial stability policy

Tucker, Paul, (2016), “The objectives of financial stability policy”, VoxEU, 28 September The objective of financial stability policy is unclear. Is it the resilience of the financial system, avoiding the costs of systemic collapse, or managing the credit cycle, containing the costs of resource misallocation and over-indebtedness? This column argues that the answers have serious implications for what can decently be delegated to independent ‘macroprudential authorities’, but have barely been debated …Read More