Sinn, Hans-Werner, (2016), “Secular Stagnation or Self-Inflicted Malaise?”, Project Syndicate, 27 September Almost exactly eight years ago, the Lehman Brothers collapse plunged the global economy into recession. The interbank market collapsed, and the entire industrialized world was thrown into the worst crisis since the end of World War II. Though central banks have maintained ultra-low interest rates, the crisis hasn’t yet been fully overcome. On the contrary, numerous economies, such as …Read More

Borio, Claudio, McCauley, Robert, McGuire, Patrick, Sushko, Vladyslav, (2016), “Bye-bye covered interest parity”, VoxEU, 28 September Covered interest parity is close to a physical law in international finance, yet it has been consistently violated since the Global Crisis. Violations since 2014, once banks had strengthened their balance sheets and regained easy access to funding, are especially puzzling. This column argues that the violation reflects a combination of foreign exchange hedging demand …Read More

Gal, Peter, Hijzen, Alexander, (2016), “Product market reforms under the microscope”, VoxEU, 27 September Product market reforms are seen as a way to boost output in advanced economies, but we know little about their short-term impact. This column presents data from 18 advanced economies that reveal large differences in the potential upside of reform depending on the sector in which a firm operates, its size, and its financial health. Relevant Posts …Read More

Vives, Xavier, (2016), “The Promise of Bank Mergers”, Project Syndicate, 23 September The banking business has fallen on hard times. The combination of persistent low interest rates, increasing regulatory compliance costs, and the rise of new competitors taking advantage of financial technologies (fintech for short) has produced, in Europe in particular, excess capacity and low profitability – and a strong temptation to merge. In a difficult market, mergers – by …Read More

Dordal i Carreras, Marc, Coibion, Olivier, Gorodnichenko, Yuriy,Wieland, Johannes, (2016),  “Infrequent but long-lived zero-bound episodes and the optimal rate of inflation”, VoxEu, 21 September Models that estimate optimal inflation rates struggle to accurately account for interest rates reaching the zero lower bound, due to the lack of historical data available. This column suggests periods of hitting the zero lower bound are longer than previously thought, and models the optimal inflation …Read More

Weisbrot, Mark, (2016), “The IMF’s Lost Influence in the 21st Century and Its Implications”, Cepr Publications, 25 July Over the last decade and a half, an epoch-making change took place in international economic relations. This change was so big that it was probably the most important development in the international financial system since the breakdown of the Bretton Woods system of fixed exchange rates in 1973. But hardly anyone noticed it. What …Read More

Brunnermeier, Markus K, Langfield, Sam,Pagano, Marco, Reis, Ricardo, Nieuwerburgh, Stijn Van, Vayanos, Dimitri, (2016), “ESBies: Safety in the tranches”, VoxEU, 20 September The Eurozone lacks a safe asset that is provided by the region as a whole. This column highlights why and how European Safe Bonds, a union-wide safe asset without joint liability, would resolve this problem, and outlines steps to put them into practice. For given sovereign default probabilities, these …Read More

D’Apice, Pasquale, (2016), “Budget-related cross-border flows: EU versus US”, VoxEU, 13 September There has been renewed interest in economic analysis of the EU budget following the Global Crisis. This column presents new calculations of cross-border flows operated through the EU budget and compares them with those estimated for the US. For each euro paid by an average net (EU member state) contributor, approximately 75 cents return through the EU budget, and …Read More

Kozlowski, Julian, Veldkamp, Laura, Venkateswaran, Venky, (2016), “The tail that wags the economy: The origin of secular stagnation”, VoxEu, 11 September The Great Recession has had long-lasting effects on credit markets, employment, and output. This column combines a model with macroeconomic data to measure how the recession has changed beliefs about the possibility of future crises. According to the model, the estimated change in sentiment correlates with economic activity. A short-lived financial …Read More

Veld, Jan in ‘t, (2016), “Public investment stimulus in surplus countries and their Eurozone spillovers”, VoxeEU, 9 September The spillover effects of a fiscal stimulus in normal times are likely to be small, at best. This column argues, however, that when interest rates are stuck at the zero lower bound and monetary policy does not offset the expansion, public investment in surplus countries could have significant positive GDP spillovers to the …Read More