Hale, G. & Obstfeld, M. (2014) “How the euro changed the pattern of international debt flows“, VoxEU Organisation, 15 May.   Large flows of bank lending from core countries in the Eurozone to the periphery lead to large financial imbalances. This column explains what motivated such financial flows. With the advent of the Eurozone, banks in core countries gained relative advantage in lending to the periphery, making such lending very …Read More

Hatcher, N. & Minford, P. (2014) “Inflation targeting vs price-level targeting: A new survey of theory and empirics“, VoxEU Organisation, 11 May.   Inflation targeting and price-level targeting have excited economists for decades. This column reviews a survey on the merits of price-level targeting. The latter could potentially help monetary policy deal with the zero bound on nominal interest rates. Such beneficial effects depend on rational expectations and a New …Read More

Belke, Α., Oeking, Α. & Setzer, R. (2014) “Exports and Capacity Constraints: A smooth transition regression model for six euro-area countries“, Economic Policy, CEPS Working Documents, 06 May.   The significant gains in export market shares made in a number of vulnerable euro-area crisis countries have not been accompanied by an appropriate improvement in price competitiveness. This paper argues that, under certain conditions, firms consider export activity as a substitute …Read More

Reinhardt, D. & Riddiough, S. (2014) “The two faces of cross-border banking flows: An investigation into the links between global risk, arms-length funding, and internal capital markets“, VoxEU Organisation, 07 May.   Cross-border funding between banks collapsed following the bankruptcy of Lehman Brothers, but the withdrawal of funding was not uniform across countries. This column argues that the composition of cross-border bank-to-bank funding can help to explain why. Interbank funding …Read More

Merler, S. (2014) “Shrinking times – ECB excess liquidity falls below €100 billion”, Bruegel Think Tank, 24 April   Over the last 5 years, the Eurozone financial system has been flooded with liquidity, due to the ECB’s very special response to the very special bank-sovereign euro crisis. In 2008, faced with an almost frozen interbank market, the ECB changed the way it allocates the Central Bank’s funds, introducing a policy …Read More

Ferrantino, J. M. & Taglioni, D. (2014) “Global value chains in the current trade slowdown”, VoxEU Organisation, 06 April.   Recent growth in trade has decelerated significantly since its sharp recovery in 2010. This column discusses the role of global value chains in international trade and their contribution to the trade slowdown. Trade in complex products organised by global value chains, in particular motor vehicles, has been more sensitive to …Read More

Ahir, H. & Loungani, P. (2014) “‘There will be growth in the spring:’ How well do economists predict turning points?“, VoxEU Organisation, 14 April.   Forecasters have a poor reputation for predicting recessions. This column quantifies their ability to do so, and explores several reasons why both official and private forecasters may fail to call a recession before it happens. Since the onset of the Great Recession, much of the …Read More

Eichengreen, B. (2014) “Losing Interest“, Project Syndicate, 11 April.   BERKELEY – Two of the world’s most prominent economic institutions, the International Monetary Fund and Former US Treasury Secretary Larry Summers, recently warned that the global economy may be facing an extended period of low interest rates. Why is that a bad thing, and what can be done about it? Adjusted for inflation, interest rates have been falling for three …Read More