Wouter den Haan, Martin Ellison, Ethan Ilzetzki, Michael McMahon, Ricardo Reis, 20 September 2017

The European Commission president’s suggestion that joining the euro should be compulsory for all EU members is not well received by over three quarters of leading economists responding to the latest Centre for Macroeconomics and CEPR survey. This column also reveals how, when asked a broader question about the success of the common currency, half the experts think it has had more benefits than costs, while only a quarter think the opposite. The majority view is that there have been significant benefits, but the way the Eurozone has been operated has also imposed significant costs.

Antonin Bergeaud, Gilbert Cette, Rémy Lecat, 04 September 2017

Over the 20th century, GDP growth was mainly driven by total factor productivity growth. Since the mid-2000s, however, productivity growth has been in decline. This column explores the history and future of growth focusing on four developed economies: the US, the Eurozone, the UK, and Japan. Simulated scenarios for the 21st century show a wide range of potential growth outcomes, dependent on whether total factor productivity growth stays indefinitely low, and whether the digital economy delivers a new productivity growth wave.

Refet Gürkaynak, Philippe Weil, 24 August 2017

This column presents the first bi-annual report from CEPR’s Euro Area Business Cycle Dating Committee on the state of the Eurozone business cycle. The main findings are that the Eurozone expansion is continuing slowly, but is creating employment at a rapid pace; the recovery is commensurate with the US recovery once the Eurozone’s double-dip sovereign debt recession is factored in; and the heterogeneity in the pace of recovery of individual member countries is driven by the heterogeneity in their recessions.

Stefan Gerlach, 01 August 2017

With the Eurozone in recovery, at some stage the ECB will raise interest rates. This column examines the conditions that might lead to this happening. A statistical analysis suggests that the likelihood of an interest rate increase is currently about 7%, but a combination of stronger growth and higher price pressures could quickly raise this to about 30%. A return of the ECB to its pre-crisis behaviour would also lead to a dramatic rise in the likelihood of an interest rate increase.

Christiane Nickel, 28 July 2017

The past decade has seen a growing role for global slack in Phillips curve approaches, as opposed to the traditional focus on domestic slack. This column explores whether augmenting Phillips curves by measures of foreign slack can help to better explain past developments in underlying inflation. A majority of specifications, both with and without foreign slack, are found to yield very similar results. Even for periods when domestic slack differed substantially from foreign slack, like between 2012 and 2016, the effects seem to be rather small.

Thorsten Beck, 04 July 2017

The recent resolutions of the Spanish Banco Popular and of two smaller Italian banks – Veneto Vanca and Banca Popolare di Vicenza – can be seen as a first important test for the banking union. This column assesses the progress made over the past three years. It argues that a ‘never bailout’ rule is inefficient, especially if referring to legacy problems; that a crisis should be resolved before a new regulatory framework is put in place; that to avoid national solutions, we need to go to a complete banking union; and finally, that the process will take some time, and new institutions and regulations are only a small step.

Athanasios Orphanides, 06 June 2017

Results of actions taken by central banks across advanced economies in response to the Global Crisis have been uneven in allaying fears regarding debt sustainability. This column compares the cases of Italy and Japan to that of Germany to examine whether monetary policy actions since the crisis have become a more important driver of debt dynamics than fiscal policy actions. In contrast to Japan, where in the past few years decisive monetary policy actions have allayed fiscal concerns, in Italy monetary policy decisions appear to have contributed to debt sustainability concerns.  

Agnès Bénassy-Quéré, Francesco Giavazzi, 31 May 2017

The euro’s economic architecture is still incomplete, meaning that any number of large shocks could reignite the crisis in the Eurozone. This column introduces a new VoxEU eBook which summarises the main issues that need to be addressed to make the euro work and identifies, for each issue, the degree of consensus among experts.

Paul-Adrien Hyppolite, 28 May 2017

The Greek crisis is typically seen as a sovereign debt crisis. Using a new dataset, this column explores the dynamics of national wealth accumulation in Greece over the past two decades. It argues that, despite certain idiosyncrasies, the Greek crisis can be better characterised as a balance of payments crisis. This implies that Greece shouldn’t be seen as an outlier amongst the periphery Eurozone countries. 

Teunis Brosens, 24 May 2017

Much progress has been made in recent years to improve the financial integration of the Eurozone.  This column argues that while banking union promotes stability, markets remain fragmented and consumers aren’t yet fully enjoying the fruits of integration. With Brexit on the horizon, it is up to the remaining EU member states to foster competition and efficiency in financial services by completing the banking union, harmonising national regulation, and accelerating the realisation of a true capital markets union. 

Mélika Ben Salem, Bárbara Castelletti, 15 May 2017

In the aftermath of the Global Crisis, sovereign yield differentials have increasingly widened among European developed countries. Financial markets seem to discriminate among peripheral economies requiring a higher risk premium than is justified by fiscal factors only. This column discusses the causes of this phenomenon. In peripheral countries, it is not due simply to the lack of fiscal discipline, but to a combination of both internal and external imbalances.

Henrike Michaelis, Volker Wieland, 12 May 2017

In recent speeches, Federal Reserve Chair Janet Yellen and ECB President Mario Draghi have attributed the Fed’s and the ECB’s low interest rate environment to low equilibrium rates rather than to Fed or ECB policies. This column argues that estimates of these equilibrium rates are extremely uncertain and sensitive to technical assumptions, and thus should not be used as key determinants of the policy stance. But if used nevertheless, a consistent application together with associated output estimates call for a tightening of the policy stance. 

Fredrik Andersson, Lars Jonung, 08 May 2017

Inflation-targeting central banks commonly fail to hit their official inflation targets, so targets are combined with a tolerance band which is either implicit or explicit. Taking the Swedish Riksbank as an example, this column argues that adopting an explicit tolerance band would better communicate to the public the central bank’s lack of full control over the rate of inflation and thus foster public confidence in monetary policy, and it would also increase the central bank’s ability to stabilise the economy. The width of the band can be derived from the historical inflation outcome. 

Robert Kollmann, Beatrice Pataracchia, Rafal Raciborski, Marco Ratto, Werner Roeger, Lukas Vogel, 27 April 2017

The Global Crisis led to a sharp contraction and long-lasting slump in both Eurozone and US real activity, but the post-crisis adjustment in the Eurozone and the US shows striking differences. This column argues that financial shocks were key determinants of the 2008-09 Great Recession, for both the Eurozone and the US. The post-2009 slump in the Eurozone mainly reflects a combination of adverse aggregate demand and supply shocks, in particular lower productivity growth, and persistent adverse shocks to capital investment linked to the poor health of the Eurozone financial system. Mono-causal explanations of the persistent slump are thus insufficient. Adverse financial shocks were less persistent for the US.

Thorsten Beck, 24 April 2017

Nine years after the onset of the Global Crisis, the problem of non-performing assets is still acute in the Eurozone. This column takes stock of the different proposals to deal with the issue. It argues that a Eurozone-level asset management company can resolve bank fragility and spur economic recovery, but warns that lack of political will and legal barriers can impede the creation of such an agency. 

Jean-Pierre Danthine, 12 April 2017

In this column, Jean-Pierre Danthine, a co-author of "Making Sense of Subsidiarity: How Much Centralization for Europe?", revisits the report nearly 25 years on from its publication. He examines the main themes of the report and shows how such areas as centralisation/decentralisation, subsidiarity, and macroeconomic stabilisation have played out over the years since the report was published. He concludes that the report was both prescient and, at the same time, represents a view from the past of the 'road not taken'.

Enrico Perotti, 04 April 2017

The members of the Eurozone are diverse in terms of their institutional quality. This column outlines the redistributive effects created by the rigid structure of a monetary union next to its direct effects on monetary credibility, and highlights the general equilibrium benefits that core countries draw from it and the cost paid by the productive sector in ‘weaker’ countries. Europe faces a clear challenge, but the success of the transition to the banking union suggests that collective efforts towards institutional evolution can succeed.

Tamim Bayoumi, Barry Eichengreen, 27 March 2017

Asymmetric aggregate supply and demand disturbances across its regions prevent the smooth functioning of a currency union. This column argues that the disturbances in peripheral regions of the US show more symmetry with those in the anchor region than is the case for the Eurozone. Moreover, disturbances to the GIPPS, which previously were in Europe’s periphery, have become more correlated with disturbances to the anchor (Germany) compared to other Eurozone countries. Hysteresis operating via the financial sector may provide an explanation for this development.

Roberto De Santis, 16 March 2017

French sovereign spreads have risen in recent months, coinciding with debate over the euro ahead of the country’s presidential elections in May. Italian sovereign spreads have been rising since the beginning of 2016. This column argues that investors are not pricing a break-up of France from the Eurozone. Most likely, they are pricing the possibility that the newly elected French government will not have enough supremacy to undertake important economic reforms. Market perception of redenomination risk in Italy, on the other hand, is rising slowly. 

Benoit Mojon, 04 March 2017

In the last two decades, there has been substantial co-movement of US and Eurozone interest rates. This column shows that the ECB’s unconventional monetary policy has largely succeeded in decoupling nominal interest rates in the Eurozone from those in the US since 2014. This has been especially true for rates of up to five years’ maturity since the rise in US interest rates following the election of Donald Trump. 

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