Joseph E. Gagnon, Joseph E. Gagnon, (2018), “QE: A User’s Guide”, Policy Brief, PIIE, October In recent years several major central banks have conducted large-scale purchases of long-term bonds and other financial assets to stimulate economic growth, boost employment, and raise inflation towards its targeted level. These policies have come to be known as quantitative easing (QE). Central banks turned to QE when they believed that further reductions in their conventional short-term policy interest rates were …Read More
Excess liquidity and bank lending risks in the euro area
Darvas Z. & D. Pichler, (2018), “Excess liquidity and bank lending risks in the euro area”, Bruegel, 26 September Excess liquidity (defined as all kinds of commercial bank deposits held by the Eurosystem minus the minimum reserve requirements) in the euro area exceeded €1,900 billion, or 17 percent of euro-area GDP, in September 2018. Holding such excess liquidity is costly for commercial banks, given that the currently negative (-0.4 percent) …Read More
The EU’s Multiannual Financial Framework and some implications for CESEE countries
Darvas Z., Wolff G., (2018), “The EU’s Multiannual Financial Framework and some implications for CESEE countries”, 12 September The European Union’s budget – which is fundamentally different from the budgets of federal countries and amounts to only about 1% of the EU’s gross national income – continues to be heavy on agricultural and cohesion spending. The literature shows that the EU’s common agricultural policy (accounting for 38% of EU spending …Read More
Monetary developments in the euro area: July 2018
ECB/Monetary developments in the euro area/July 2018 Annual growth rate of broad monetary aggregate M3 decreased to 4.0% in July 2018 from 4.5% in June (revised from 4.4%) Annual growth rate of narrower aggregate M1, comprising currency in circulation and overnight deposits, decreased to 6.9% in July from 7.5% in June Annual growth rate of adjusted loans to households stood at 3.0% in July, unchanged from previous month Annual growth …Read More
International trade under attack: what strategy for Europe?
Jean S., Martin P., Sapir A., “International trade under attack: what strategy for Europe?”, Bruegel, 28 August The multilateral trading system is seriously threatened by the country which has been its main inspirer, the United States. The US position is focused on bilateral trade imbalances presumably resulting from unbalanced trade policies, but it is flawed. Not only does it make little sense given the existence of global value chains, but …Read More
Eurostatistics – DATA FOR SHORT-TERM ECONOMIC ANALYSIS
Eurostat/Eurostatistics- DATA FOR SHORT-TERM ECONOMIC ANALYSIS/August 2018 International context: GDP growth accelerated in the US in Q2 2018. According to the advance estimate released by the Bureau of Economic Analysis (BEA), the annual GDP growth rate of the US rose substantially to 4.1% in Q2 2018 from 2.2% in Q1. The acceleration of growth in Q2 2018 was due to increases in personal consumption expenditure, exports, federal government expenditure, and …Read More
Understanding Euro Area Inflation Dynamics: Why So Low for So Long?
Abdih Y., Lin L., Paret A-C., (2018), “Understanding Euro Area Inflation Dynamics: Why So Low for So Long?”, Working Paper No. 18/188, IMF, 22 August Despite closing output gaps and tightening labor markets, inflation has remained low in the euro area. Based on an augmented Phillips Curve framework, we find that this phenomenon—sometimes attributed to low global inflation—has been primarily caused by a remarkable persistence of inflation, keeping it low …Read More
Could the 7+7 report’s proposals destabilise the euro? A response to Guido Tabellini
J. Pisani-Ferry, J. Zettelmeyer, (2018), “Could the 7+7 report’s proposals destabilise the euro? A response to Guido Tabellini”, 20 August In the opening contribution to the VoxEU debate on euro area reform, we and twelve other French and German economists proposed a package of reforms aimed at increasing the stability of the euro area (Bénassy-Quéré et al. 2018). These pursue three objectives: The first is to eliminate the ‘doom loop’ …Read More
The great fiscal lever: An Italian economic obsession
A. Terzi, (2018), “The great fiscal lever: An Italian economic obsession”, 21 August “Give me a fulcrum and a lever long enough, and I shall move the world” – so the great Greek mathematician Archimedes used to say. In the Italian macroeconomic context, many are similarly convinced that if only we pushed more on the fiscal lever, we could set in motion an economy that has stagnated for almost 20 …Read More
Delivering a safe asset for the euro area: A proposal for a Purple bond transition
Bini-Smaghi L., M. Marcussen, (2018), “Delivering a safe asset for the euro area: A proposal for a Purple bond transition”, Vox EU, 20 July Eurobonds are today politically unfeasible… Genuine Eurobonds with joint and several liability would bring significant benefits and stability to the euro area. Top of this list is credibility, further cementing that the euro is here to stay. Such an instrument would also price counter-cyclically as investors …Read More