Ricardo Reis, (2016), “QE in the future: the central bank’s balance sheet in a fiscal crisis”, Centre for Economic Policy Research, July Analysis of quantitative easing (QE) typically focus on the recent past studying the policy’s effectiveness during a financial crisis when nominal interest rates are zero. This paper examines instead the usefulness of QE in a future fiscal crisis, modeled as a situation where the fiscal outlook is inconsistent with …Read More

Janssen, Ronald, (2016), “The OECD And Job Protection: New Findings But Old Policy Recipes On ‘Your Wage Or Your Job”, Social Europe, 7 July One of the key findings from the 2016 Employment Outlook just released by the OECD is that easier firing does not create jobs. Moreover, the OECD also finds that loosening job protection in the middle of an economic downturn results in immediate and substantial job losses. However, …Read More

De Grauwe, Paul, Ji, Yuemei, (2016), “Animal spirits and the optimal level of the inflation target”, Voxeu, 7 July Low inflation targets can cause economies to hit the zero lower bound during deflationary periods caused by even mild shocks. In such circumstances, central banks lose their ability to stimulate the economy. This column assesses the risk of this happening using a model that endogenises self-perpetuating optimism and pessimism in the economy. …Read More

Barnichon, Régis, Matthes, Christian, (2016), “Understanding the Size of the Government Spending Multiplier: It’s in the Sign”, Centre for Economic Policy Research, July Despite intense scrutiny, estimates of the government spending multiplier remain highly uncertain, with values ranging from 0.5 to 2. While an increase in government spending is generally assumed to have the same (mirror-image) effect as a decrease in government spending, we show that relaxing this assumption is important …Read More

Pastor, Lubos, (2016), “Brexit versus Grexit: Why you might call a referendum and then reject its outcome”, Voxeu, 4 July Britain voted for Brexit, but many seek ways to avoid it. This draws comparison with the events of almost exactly a year ago when the Greek government ignored the outcome of the Greek bailout referendum. This column argues that the Greek government hoped the result would crash the EU’s stock markets …Read More

Acemoglu, Daron, Restrepo, Pascual, (2016), “The race between machines and humans: Implications for growth, factor shares and jobs”, Voxeu, 5 July Many economists throughout history have been proven wrong in predicting that technological progress will cause irreversible damage to the labour market. This column shows that so far, the labour market has always adapted to the replacement of jobs with capital, using evidence of new types of skilled jobs between 1970 and …Read More

Schmidt, Vivien, (2016), “Brexit And The EU: A New Deal For All The EU Or No Deal At All?”, Social Europe, 1 July Now that the UK has voted to leave the EU, all the attention has been focused on how it will go about leaving, or even whether it will leave in the end.  But equally important is how the EU responds to Brexit:  whether as an isolated case to …Read More

Jarocinski, Marek, Lenza, Michele, (2016), “How large is the output gap in the euro area”, European Central Bank, 1 July The estimates of the output gap depend on the features of the models used to derive them. We discriminate among different estimates on the basis of their ability to forecast inflation. Our analysis suggests that output in the euro area was 6% lower than potential in 2014 and 2015, which is …Read More

DeGrauwe, Paul, (2016), “The EU Should Take The Side Of The Losers Of Globalization”, Social Europe, 4 July How should the European Union react to the decision of the British people to withdraw from the union? This is the question that is at the center of the political debate in Europe. The starting point in trying to answer this question is the observation that the European Union has a very negative image …Read More

Bossone, Biagio, Labini, Stefano Sylos, (2016), “Macroeconomics in Germany: The forgotten lesson of Hjalmar Schacht”, VoxEU, 1 July Despite facing many of the same challenges, Germany’s current macroeconomic policy is substantially different to those of other countries, in part due to the economy legacy of Walter Eucken. This column considers the economic policy of Hjalmar Schacht, whose ‘MEFO-bills’ monetary solution ended the years of economic struggle caused by the Treaty of …Read More