Ollivaud, Patrice, Pionnier, Pierre-Alain, Rusticelli, Elena, Schwellnus, Cyrille, Koh, Seung-Hee, (2016), “Forecasting GDP during and after the Great Recession”, OECD Economics Department Working Papers No. 1313, 26 July This paper compares the short-term forecasting performance of state-of-the-art large-scale dynamic factor models (DFMs) and the small-scale bridge models routinely used at the OECD. Pseudoreal time out-of-sample forecasts for France, Germany, Italy, Japan, United Kingdom and the United States during and after the Great Recession …Read More
How to deal with the Resolution of Financial Market Infrastructures
Huertas, Thomas, (2016), “How to deal with the Resolution of Financial Market Infrastructures”, CEPS Series: Task Force Report, 19 October This new interim report by the CEPS Task Force on Implementing Financial Sector Resolution welcomes international efforts to devise guidelines to ensure that FMIs are resolvable, i.e. acknowledging that any FMI can fail, but if an FMI fails, critical operations will continue to be performed. The report argues that European rules in …Read More
Income distribution and aggregate saving: New evidence
Bofinger, Peter,Scheuermeyer, Philipp, (2016), “Income distribution and aggregate saving: New evidence”, VoxEu, 20 October The effect of income distribution on aggregate saving has important implications for aggregate demand and global current account imbalances. Drawing on evidence from a panel of high-income OECD countries, this column documents a hump-shaped relationship between inequality and aggregate saving rates. It also shows that the relationship between inequality and saving depends on financial market conditions. …Read More
A new measure of economic asymmetries in the Eurozone
Campos, Nauro, Macchiarelli, Corrado, (2016), “A new measure of economic asymmetries in the Eurozone”, VoxEu, 19 October Explanations for the Eurozone Crisis rely on the notion of cross-country asymmetries. The core-periphery pattern to the EU was first established by Bayoumi and Eichengreen in 1993, prior to the Eurozone. This column replicates their approach to explore whether the euro has strengthened or weakened this pattern. A new ‘coreness index’ indicates that …Read More
A framework for thinking about bad loans
Demertzis, Maria, (2016), “A framework for thinking about bad loans”, Bruegel, 18 October An important guiding principle in resolving non-performing loans (NPLs) should be to ensure that viable debt remains serviced, while non-viable debt gets resolved. We present here a framework to approach the issue. Relevant Posts Panagiotarea, Eleni, (2016), “The Political Economy of NPLs resolution: Ownership and conditionality”, Hellenic Observatory LSE, 13 October Minenna, Marcello, (2016), “The Italian Non-Performing Loans …Read More
Toxic Politics Versus Better Economics
A. El-Erian, Mohamed, (2016), “Toxic Politics Versus Better Economics”, Project Syndicate, 15 October The relationship between politics and economics is changing. Advanced-country politicians are locked in bizarre, often toxic, conflicts, instead of acting on a growing economic consensus about how to escape a protracted period of low and unequal growth. This trend must be reversed, before it structurally cripples the advanced world and sweeps up the emerging economies, too. Relevant Posts …Read More
Resolving Europe’s Banking Crisis in Italy
Reichlin, Lucrezia, Vallée, Shahin, (2016), “Resolving Europe’s Banking Crisis in Italy”, Project Syndicate, 14 October The European banking sector is crippled and highly fragmented. Though its problems are more acute for some countries and financial institutions, the sector runs on a level of profitability that is, on average, lower than its cost of equity and maintains a stock of non-performing loans and hard-to-value assets large enough to undermine its capitalization for years …Read More
The Blind Side of Public Debt Spikes
Jaramillo, Laura, Mulas-Granados, Carlos, Kimani, Elijah, (2016), “The Blind Side of Public Debt Spikes”, IMF Working Paper, October What explains public debt spikes since the end of WWII? To answer this question, this paper identifies 179 debt spike episodes from 1945 to 2014 across advanced and developing countries. We find that debt spikes are not rare events and their probability increases with time. We then show that large public debt spikes …Read More
Countering a regressive and illiberal Europe
A. Emmanouilidis, Janis, Zuleeg, Fabian, (2016), “Countering a regressive and illiberal Europe”, European Policy Centre, 13 October After the Brexit vote and the collective failure to predict the impending earthquake and ‘sign of times’, it would be a mistake to carry on as if nothing had happened. Although the UK is undoubtedly a special case, there is a need to reflect more fundamentally on the state of European integration and …Read More
Reflections on the natural rate of interest, its measurement, monetary policy and the zero lower bound
Cukierman, Alex, (2016), “Reflections on the natural rate of interest, its measurement, monetary policy and the zero lower bound”, VoxEu, 15 October The decline in long-term interest rates has nurtured the view of a persistent shift of the natural rate into negative territory. This column argues that existing estimates of the natural rate, based on the New Keynesian model, are likely to be biased downward. It makes a case for …Read More