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A new bargaining perspective on sovereign debt restructuring

Miller,Marcus, Ghosal,Sayantan, (2017), “A new bargaining perspective on sovereign debt restructuring”, VoxEU, 17 April Lacking some supra-national, overseeing authority, sovereigns in default typically renegotiate with their creditors. In these negotiations, the owed principal typically receives a ‘haircut’. This column explores whether overburdened sovereign debtors can strategically leverage delay as they bargain with their creditors. Under asymmetric information, a delay in the form of offers that the debtor knows won’t be …Read More

The ECB’s announcements of non-standard measures and longer-term inflation expectations

Karadi, Peter, (2017), “The ECB’s announcements of non-standard measures and longer-term inflation expectations”, European Central Bank Research Bulletin No. 33, 18 April Stable and well-anchored longer-term inflation expectations bolster the ability of the European Central Bank (ECB) to achieve its medium-term inflation objective. This article assesses the effectiveness of non-standard monetary policy measures in guiding longer-term inflation expectations in an environment where standard interest rate policy approaches the lower bound. …Read More

Finally, some good economic news from the Eurozone – but will it last?

Sander, Harald, (2017), “Finally, some good economic news from the Eurozone – but will it last?”, LSE EUROPP, 10 April 2017 Eurostat figures released at the start of April show the Eurozone unemployment rate has dropped to its lowest level for almost eight years. Harald Sander writes that there are now some solid grounds for optimism about the Eurozone economy, but that after nine years of economic struggles, a great deal …Read More

Eurozone unemployment falls to its lowest rate in 8 years

Khan Mehreen, (2017), “Eurozone unemployment falls to its lowest rate in 8 years”, Financial Times, 3 April More than 1m people have been lifted out of unemployment in the eurozone during the past year, pushing the jobless rate to the lowest in almost eight years and underscoring how the economic recovery is gathering pace across the bloc. Factories in the eurozone also enjoyed another bumper month, reporting their highest levels of …Read More

Optimal Fiscal and Monetary Policy, Debt Crisis and Management

Cantore, Cristiano, Melina, Giovanni, Pearlman, Joseph G, Levine, Paul L, (2017), “Optimal Fiscal and Monetary Policy, Debt Crisis and Management”, IMF Working Paper 17/78, 30 March The initial government debt-to-GDP ratio and the government’s commitment play a pivotal role in determining the welfare-optimal speed of fiscal consolidation in the management of a debt crisis. Under commitment, for low or moderate initial government debt-to-GPD ratios, the optimal consolidation is very slow. …Read More

EU Income Inequality And The Great Recession

Vcas-Soriano, Carlos, Fernández-Macías, Enrique, (2017), “EU Income Inequality And The Great Recession”, Social Europe, 21 March EU-wide income inequality declined notably prior to 2008, driven by a strong process of income convergence between European countries. The Great Recession broke this trend. After 2008, income convergence has been sluggish, while inequality within many countries has increased significantly. Despite the implicit assumption stemming from many EU policy documents that European economic integration should lead …Read More

Chart of the Week: Inequality and the Decline in Labor Share of Income

iMFBlog, (2017), “Chart of the Week: Inequality and the Decline in Labor Share of Income”, 20 March As discussed in the IMF’s G20 Note, and a blog last week by IMF Managing Director Christine Lagarde, a forthcoming chapter of the World Economic Outlook seeks to understand the decline in the labor share of income (that is, the share of national income paid in wages, including benefits, to workers) in many countries …Read More

Carving out legacy assets: a successful tool for bank restructuring?

Lehmann, Alexander, (2017), “Carving out legacy assets: a successful tool for bank restructuring?”, Bruegel, 21 March Separating ‘legacy assets’ from banks’ core business is central to the rehabilitation of Europe’s banking system. How can Europe progress in its ongoing effort to rid the financial system of legacy assets, and equip it with renewed growth? Relevant Posts Honohan, Patrick, (2017), “Management and Resolution of Banking Crises: Lessons from Recent European Experience Patrick …Read More

The inflation basket case

Merler, Silvia, (2017), “The inflation basket case“, Bruegel, 17 March ECB President Draghi highlighted that there are no signs yet of a convincing upward trend in underlying inflation. Indeed, this stands out clearly if we look more in detail at the composition of the basket. Figure 1 shows the headline and core inflation rates for the euro area, together with the share of items in the Harmonised Consumer Price Index …Read More

The Role of Fiscal Policy When Private Debt is High

Batini, Nicoletta, Melina, Giovanni, Moreno Badia, Marialuz, Villa, Stefania, (2017), “The Role of Fiscal Policy When Private Debt is High”, EconoMonitor, 15 March Excessive private debt is a major headwind against the global recovery. Where fiscal space is available, a more active role of fiscal policies can facilitate an orderly private deleveraging while minimizing its output costs. However, fiscal policy cannot do it alone; it has to be supported by complementary …Read More