What macroeconomic policies for the Eurozone?

Francesco Giavazzi, Guido Tabellini 25 September 2014

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In his recent article on Vox, Roberto Perotti takes issue with the proposal of coordinating a monetary and fiscal expansion in the Eurozone through a money-financed temporary tax cut, which we advocated in a column on 21 August (see Perotti 2014, Giavazzi and Tabellini 2014). He does not question the effectiveness of the proposal in stimulating aggregate demand.

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Topics:  Macroeconomic policy Monetary policy

Tags:  eurozone, Eurozone economy, macroeconomic policy, Budget deficit, fiscal expansion

Eurozone recovery: there are no shortcuts

Roberto Perotti 13 September 2014

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The consensus is increasing that austerity has not worked – Europe stands on the edge of deflation and suffers from a deficit of demand. A recent VoxEU proposal (Giavazzi and Tabellini 2014) offers a solution that is widely shared on both sides of the Atlantic – all Eurozone countries should cut taxes simultaneously by 5% of GDP, and the ECB should buy the extra debt without sterilisation. This should be accompanied by a credible plan to reduce government spending in the future.

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Topics:  Macroeconomic policy Monetary policy

Tags:  austerity, eurozone, monetary policy, helicopter money, quantitative easing, QE, stimulus, fiscal consolidation, fiscal policy, spending cuts, fiscal sustainability, debt monetisation

Is the ECB doing QE?

Charles Wyplosz 12 September 2014

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The 4 September announcement by Chairman Mario Draghi has been greeted with enthusiasm by the markets and the media. It has been long awaited, and many believe that the ECB has finally delivered. This is not sure. The ECB intends to buy large amounts of securities backed by bank lending to households (mortgages) and to firms.

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Topics:  Exchange rates Financial markets Monetary policy

Tags:  quantitative easing, QE, monetary policy, unconventional monetary policy, ECB, securitisation, bank lending, Europe, eurozone, Subprime, stress tests, deleveraging, recapitalisation, depreciation, exchange rates, euro, central banking

To exit the Great Recession, central banks must adapt their policies and models

Marcus Miller, Lei Zhang 10 September 2014

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“Practical men…are usually the slaves…[of] some academic scribbler of a few years back” – John Maynard Keynes.

For monetary policy to be most effective, Michael Woodford emphasised the crucial importance of managing expectations. For this purpose, he advocated that central banks adopt explicit rules for setting interest rates to check inflation and recession, and went on to note that:

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Topics:  Global crisis Macroeconomic policy Monetary policy

Tags:  Taylor rule, forward guidance, great moderation, global crisis, Great Recession, quantitative easing, DSGE models, expectations, tapering, US, UK, Europe, eurozone, ECB, Bank of England, central banking, IMF, unconventional monetary policy

Pricing to market and Eurozone membership: Evidence from Latvia

Alberto Cavallo, Brent Neiman, Roberto Rigobon 22 August 2014

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What happens to prices when a country joins a currency union? And do prices behave differently in pegged exchange rate regimes compared to common currency areas? The answer to this question is a critical input to a country’s choice of currency regime.

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Topics:  Europe's nations and regions

Tags:  eurozone, Latvia, pricing, currency membership

Lessons from history for the European Financial Crisis

Selin Sayek, Fatma Taskin 05 July 2014

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As of July 2014, we continue to debate whether the European economy is out of the woods. The effectiveness of policies and the prospects of full recovery are under scrutiny. The unique nature of Europe’s monetary union begets further questions of whether policies should be designed to resolve a single euro crisis, or whether they should be designed to resolve multiple European crises occurring simultaneously. A discussion of whether the sui generis European project has led to a sui generis set of financial crises would provide a framework for these policy discussions.

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Topics:  Economic history Europe's nations and regions Global crisis

Tags:  eurozone, financial crisis, EZ crisis, GIIPS

The euro crisis: Muddling through, or on the way to a more perfect euro union?

Joshua Aizenman 03 July 2014

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The short history of the Eurozone has been remarkable and unprecedented – the euro project has moved from the planning board to a vibrant currency within less than ten years. Otmar Issing’s optimistic speech in 2006 reflects well the buoyant assessment of the first decade of the euro – an unprecedented formation of a new currency without a state.1 Observers viewed the rapid acceptance of the euro as a viable currency and the deeper financial integration of the Eurozone and the EU countries as stepping stones toward a stable and prosperous Europe.

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Topics:  Institutions and economics International finance Monetary policy

Tags:  Germany, ECB, eurozone, inflation targeting, euro, institutions, Eurozone crisis, GIIPS

Why Europe needs two euros, not one

Jacques Melitz 02 July 2014

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One basic feature of the sickly situation in the Eurozone today is that the system does not clearly bear any essential flaw from the standpoint of Germany. All things considered, the country has not done badly since the Great Recession of 2008-2010. And as the Eurozone moves forward gingerly with necessary reforms in order to avoid a break-up of the system, it is evident that Germany is constantly under pressure to go further with concessions than it would prefer.

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Topics:  EU institutions EU policies

Tags:  Germany, eurozone, second common currency

Saving the euro: self-fulfilling crisis and the ‘Draghi put’

Marcus Miller, Lei Zhang 26 June 2014

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In surveying eight centuries of financial folly, Reinhart and Rogoff (2009) observed that:

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Topics:  International finance Monetary policy

Tags:  ECB, eurozone, sovereign debt, financial crises, sovereign debt crisis, Outright Monetary Transactions, European sovereign debt crisis, self-fulfilling crises

Has the Great Recession harmed the long-term growth prospects of the Eurozone economy?

Philippe Weil interviewed by Viv Davies,

Date Published

Fri, 06/20/2014

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See Also

CEPR Business Cycle Dating Committee (2014), "Eurozone mired in recession pause", VoxEU.org, 17 June.

CEPR Business Cycle Dating Committee (2014), "Euro Area Mired in Recession Pause", www.cepr.org, 11 June.

 

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Topics

Europe's nations and regions Global crisis
Tags
eurozone, growth, GDP, recession, business cycles, CEPR, trough, business cycle dating, expansion, peak

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