Parguez, Alain, (2016), “Economic Theories of Social Order and the Origins of the Euro”, International Journal of Political Economy, 29 April This paper explores how the Euro project became a reality as a result of conflicting political and economic forces. The idea was born in the interwar period in France, among a circle of Traditionalist elites and conservative intellectuals, politicians, and businessmen. They dreamed of restoring an allegedly genuine social order that …Read More
Manna from Helicopters
Biggs, Michael, (2016), “Manna from Helicopters”, Project Syndicate, 13 Μay In recent years, the global economy has been plagued by inadequate demand and the rising risk of deflation. Central banks have responded with a range of unconventional measures, including quantitative easing (QE) and negative interest rates. Today, however, there is a growing consensus that the efficacy of monetary stimulus has reached its limits. Further efforts to support economic recovery will likely require …Read More
The euro trilemma, or: how the Eurozone fell into a neofunctionalist legitimacy trap
Zimmermann, Hubert, (2016), “The euro trilemma, or: how the Eurozone fell into a neofunctionalist legitimacy trap”, Journal of European Integration, 19 February The Euro-Crisis can be explained by the calamitous interaction of two neofunctionalist logics operating in the Eurozone since its inception: first, a logic of irreversible enlargement, and second, a logic of continuous deepening. The logic of enlargement perpetuates greater divergence among the members of the Eurozone, not only with respect …Read More
Debunking ‘fiscal alchemy’: The role of fiscal councils
Beetsma, Roel, Debrun, Xavier, (2016), “Debunking ‘fiscal alchemy’: The role of fiscal councils”, Voxeu, 16 Μay The success of independent central banks is often used to argue in favour of independent fiscal councils with the aim of promoting sound fiscal policies. But unlike central banks, fiscal councils have no policy levers to pull – they can bark but never bite. This column explores the theoretical foundations and practical implications of fiscal councils. The …Read More
Schäuble vs Draghi: German losses from ECB policy are real but self-inflicted
Braun, Benjamin, (2016), “Schäuble vs Draghi: German losses from ECB policy are real but self-inflicted”, LSE blog, 12 Μay Germany has recently voiced criticism of the European Central Bank (ECB) from the perspective that its policies, such as quantitative easing, have a particularly negative effect within Germany. Benjamin Braun argues that while there have indeed been German losses from the ECB’s policies, much of the problem stems from the country’s reluctance to …Read More
Banking Crises
Grossman, Richard, (2016), “Banking Crises”, Centre for Economic Policy Research, Μay Financial crises have been a common feature of the economic landscape for more than two centuries. The chapter defines banking crises, considers the type of costs that they impose, and outlines the most common causes of banking crises during the past 200 years. The remainder of the chapter considers five distinct historical periods: the nineteenth century, when the “boom-bust” pattern …Read More
Flexibility versus Stability: A difficult trade-off in the eurozone
De Grow, Paul, Ji, Yuemei, (2016), “Flexibility versus Stability: A difficult trade-off in the eurozone”, CEPS, 29 Αpril Optimal currency area (OCA) theory has been influential in pushing eurozone countries towards structural reforms to make product and labour markets more flexible. The underlying assumption of the OCA prescription for structural reform is that asymmetric shocks are permanent. However, when shocks are temporary it does not follow that more flexibility is the answer. …Read More
Bank Exposures and Sovereign Stress Transmission
Altavilla, Carlo, Pagano, Marco, Simonelli, Saverio, (2016), “Bank Exposures and Sovereign Stress Transmission”, Centre for Economic Policy Research, Μay Using novel monthly data for 226 euro-area banks from 2007 to 2015, we investigate the causes and effects of banks’ sovereign exposures during and after the euro crisis. First, in the vulnerable countries, the publicly owned, recently bailed out and less strongly capitalized banks reacted to sovereign stress by increasing their domestic sovereign holdings …Read More
Key drivers of EU budget allocation: Does power matter?
Zaporozhets, Vera, García-Valiñas, María, Kurz, Sascha, (2016), “Key drivers of EU budget allocation: Does power matter?”, European Journal of Political Economy, Μay We examine the determinants of the EU budget allocation among Member States. In line with the analysis by Kauppi and Widgrén (2004) we test two alternative explanations: political power vs. “needs view” . To do so, we extend the original data set (1976–2001) up to 2012 and introduce alternative econometric specifications. We …Read More
On the Economics of Crisis Contracts
Elias, Aptus, Gersbach, Hans, Volker, Britz, (2016), “On the Economics of Crisis Contracts”, Centre for Economic Policy Research, Μay We examine the impact of so-called “Crisis Contracts” on bank managers’ risk-taking incentives and on the probability of banking crises. Under a Crisis Contract, managers are required to contribute a pre-specified share of their past earnings to finance public rescue funds when a crisis occurs. This can be viewed as a retroactive tax that …Read More