Wolff, Guntram, (2016), “Six lessons about “real” people, Brexit, and the EU”, Bruegel, 27 June The result of the UK referendum on 23 June has been portrayed as a victory for “real people”. But what consequences will the result have, and how should the UK and EU now react? “…this will be a victory for real people, a victory for ordinary people, a victory for decent people.” These are the words …Read More
Why it doesn’t make sense to hold bonds
Csullag, Balazs, Danielsson, Jon, Macrae, Robert, (2016), “Why it doesn’t make sense to hold bonds”, VoxEU, 27 June Investor demand for bonds is very high. This column argues that this is surprising because under almost any likely inflation scenario, including central banks merely hitting their target inflation rates, bondholders suffer large losses. The beneficiaries are sovereign and corporate borrowers; the losers are pension funds, insurance companies and some foreign exchange reserve funds. Meanwhile, …Read More
Jumpstarting Europe’s Economy
Tyson, Laura, Labaye, Eric, (2016), “Jumpstarting Europe’s Economy”, Project Syndicate, 25 June Not so long ago, the notion of the European Central Bank handing out money to governments or directly to citizens – so-called “helicopter money” drops – would have seemed outlandish. But today a surprising number of mainstream economists and centrist politicians are endorsing the idea of monetary financing of stimulus measures in different forms.This represents a much-needed change …Read More
Making the Eurozone more resilient: What is needed now and what can wait?
Baldwin, Richard et al., (2016), “Making the Eurozone more resilient: What is needed now and what can wait?”, Voxeu, 25 June Britain voted to leave the EU. This is terrible news for the UK, but it is also bad news for the Eurozone. Brexit opens the door to all sorts of shocks, and dangerous political snowball effects. Now is the time to shore up the Eurozone’s resiliency. The situation is …Read More
Negative rates and seigniorage: Turning the central bank business model upside down – the special case of the ECB
Gros, Daniel, (2016), “Negative rates and seigniorage: Turning the central bank business model upside down – the special case of the ECB”, Voxeu, 27 June The business of central banks used to be profitable – they issued cash and could invest the proceeds in the assets they liked. This column argues that the ECB has turned the old business model of central banks around. Today, it earns a stream of …Read More
The European Central Bank: A Central Bank Operating In A Democratic Void
Ryan, John, (2016), “The European Central Bank: A Central Bank Operating In A Democratic Void”, Social Europe, 24 June The ECB is far more independent than the Federal Reserve, whose legal status is far weaker and which is directly accountable to Congress and the government. The ECB was supposed to be like the German central bank, the Bundesbank. It has, however, failed to emulate the distinctive attributes that made the Bundesbank …Read More
Do Fiscal Multipliers Depend on Fiscal Positions?
Huidrom, Raju, Kose, Ayhan, Lim, Jamus, Ohnsorge, Franziska, (2016), “Do Fiscal Multipliers Depend on Fiscal Positions?”, Centre for Economic Policy Research, June This paper analyzes the relationship between fiscal multipliers and fiscal positions of governments using an Interactive Panel Vector Auto Regression model and a large dataset of advanced and developing economies. Our methodology permits us to trace the endogenous relationship between fiscal multipliers and fiscal positions while maintaining enough degrees of freedom to …Read More
The day after Brexit: what do we know?
Batsaikhan, Uuriintuya, (2016), “The day after Brexit: what do we know?”, Bruegel, 22 June Article 50 of the Treaty of the European Union (December 2009) sets out the procedural requirements for a member state to terminate its membership. Legal withdrawal would mean that EU Treaties and their Protocols would no longer apply, and EU financial programmes would be phased out. If the UK votes to leave the EU on Thursday, the result …Read More
Basic Income Revisited
Robert Skidelsky, (2016), “Basic Income Revisited”, Project Syndicate, 23 June Britain isn’t the only country holding a referendum this month. On June 5, Swiss voters overwhelmingly rejected, by 77% to 23%, the proposition that every citizen should be guaranteed an unconditional basic income (UBI). But that lopsided outcome doesn’t mean the issue is going away anytime soon. Relevant Posts Guio, Anne-Catherine, Marlier, Eric, Gordon, David, Fahmy, Eldin, Nandy, Shailen, Pomati, …Read More
Optimal Automatic Stabilizers
McKay, Alisdair, Reis, Ricardo, (2016), “Optimal Automatic Stabilizers”, Centre for Economic Policy Research, June Should the generosity of unemployment benefits and the progressivity of income taxes depend on the presence of business cycles? This paper proposes a tractable model where there is a role for social insurance against uninsurable shocks to income and unemployment, as well as inefficient business cycles driven by aggregate shocks through matching frictions and nominal rigidities. We derive …Read More