Marco Buti, Alessandro Turrini, 06 October 2017

Exceptionally low wage growth is at the heart of low Eurozone inflation, while wage growth differentials are not contributing enough to a symmetric rebalancing in the currency union. This column discusses the role that wage developments at the Eurozone level can play in supporting monetary policy and fostering external rebalancing. Although wage setting is a prerogative and not a policy under direct government control, a rationale for the coordination of a number of government policies affecting competitiveness exists, and potential benefits are apparent in the current context.

Filippo di Mauro, Francesco Pappadà, 02 June 2014

Trade imbalances in the Eurozone require relative price adjustments. This column argues that the traditional ‘elasticity’ approach is lacking when thinking about the adjustment magnitude. Exports adjust when exporting firms sell more (intensive margin) and new firms start exporting (extensive margin). The extensive-margin reaction depends upon the fatness of firm-level productivity distributions. Surplus-country distributions have fatter tails than deficit countries, suggesting that the price adjustment magnitude may be larger than traditional calculations suggest.

Raphael Auer, 07 May 2013

Recent data show that the current-account deficits of Greece, Italy, Spain, and Portugal have improved at a rapid pace and are actually close to being balanced. This column reviews recent research that shows this adjustment has been remarkably fast. Compared to mid-2008, these four nations have switched expenditures at a rate that is much higher than the typical rate observed during large rebalancing episodes. A key requirement for a return to a post-crisis Eurozone is thus on its way to being met.

Jean-Pierre Landau, 18 April 2013

Low interest rates and bank deleveraging combine to produce slow growth and rising financial risks in advanced economies. This column argues that appropriate macroprudential policies could contribute to redirecting risk taking, promoting growth and reducing uncertainty through more orderly deleveraging in the financial sector.

Giancarlo Corsetti, Philippe Martin, Paolo Pesenti, 31 January 2013

Current-account imbalances in Europe are at the heart of the crisis .This column argues that relative price adjustment need not be as dramatic as some observers claim. In order to foster rebalancing, policy should target obstacles to firms' entry, startup costs, and the incentives for product differentiation, letting relative prices and wages adjust in equilibrium. Setting up firms and new production lines is costly and in the current circumstances, policy should also address tight credit constraints on investment and firms’ activity.

Yiping Huang, 17 February 2012

The international community, and particularly policymakers in the US, put great expectations on the contribution that China can make to a global economic recovery by rebalancing its economy through promoting consumption growth. This column, drawing on both official and unofficial data, argues that China’s long-awaited economic rebalancing is already well under way.

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