Did the euro kill governance in the periphery?

Jesús Fernández-Villaverde, Luis Garicano, Tano Santos 30 April 2013

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The conventional wisdom before the creation of the euro was that the monetary union would force its least productive members to undertake the structural reforms needed to modernise their economies. In the past, the peripheral European countries had used devaluations to recover from adverse business-cycle shocks, but without correcting the underlying imbalances of their economies. The euro was expected to eliminate the bias of their monetary policy toward inflation, force sound fiscal policy and encourage widespread liberalisation.

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Topics:  EU institutions Politics and economics

Tags:  euro, governance, resource curse

Infrastructure: The governance failures

Nicklas Garemo, Jan Mischke 30 March 2013

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Europe’s infrastructure programme was the big loser from February’s EU budget deal. Planned infrastructure investment of €50 billion over seven years was reduced to just €24 billion. Among the programmes that now look in doubt is the Connecting Europe Facility, which included financial support for the development of cross-European transport, cleaner energy supply, and fast broadband connections, and was designed to catalyse private investment in all three, too.

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Topics:  Industrial organisation Politics and economics

Tags:  governance, infrastructure

The problems of European monetary union – asymmetric shocks or asymmetric behaviour?

Andrea Boltho, Wendy Carlin 31 March 2012

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Much of the literature that was sceptical of the prospective success of the euro feared the effects of Mundellian asymmetric shocks on an area which (unlike the US) had little inter-country labour mobility and no common fiscal policy. Early research, for instance, pointed out that Europe’s periphery, in particular, had suffered from large idiosyncratic shocks in comparison to Europe’s core, let alone to US regions (Bayoumi and Eichengreen 1992). This, many felt, could create difficulties for the operation of a monetary union.

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Topics:  Europe's nations and regions

Tags:  eurozone, growth, governance

What is holding Italy back?

Daniel Gros 09 November 2011

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Italy’s economy has clearly underperformed since it entered the euro – both relative to its peers and relative to the previous decade. Italy’s growth rate averaged just over 1% during the boom years preceding the crisis. During the crisis, its GDP plunged 5%; instead of rebounding, its economy is now growing at only about 1%.

At this rate, Italy’s public debt, at 120% of GDP, becomes an existential threat to the entire Eurozone (Eichengreen 2011).

Understanding and curing Italy’s growth problems is thus vital for the survival of the euro.

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Topics:  Europe's nations and regions Global crisis

Tags:  Italy, governance, global crisis

The long shadow of the fall of the wall

Daniel Gros 17 June 2010

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Economists call a happy monetary union an ‘optimum currency area’. The Eurozone is clearly no longer a happy family, but as Tolstoy observed some time ago, unhappy families are unhappy in their own ways.

The Eurozone is not really suffering the kind of ‘asymmetric’ shock that economists used to take as the biggest problem for a monetary union. The crisis of 2010 seems rather to be the result of a large global shock which affects different Eurozone member countries differently because some are not prepared for rough times.

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Topics:  EU institutions

Tags:  governance, Eurozone crisis, Eurozone rescue

Eurozone governance: What went wrong and how to repair it

Jean Pisani-Ferry 17 June 2010

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The EU faces two challenges: managing the crisis while coordinating Eurozone adjustment, and reforming its governance to avoid future crises. The first is vital in the eyes of the markets but creation of the Van Rompuy task force has focused attention on the second.

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Topics:  EU institutions

Tags:  governance, Eurozone crisis, Eurozone rescue

Natural resources and development strategy after the crisis

Milan Brahmbhatt, Otaviano Canuto 02 March 2010

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Recent events have rekindled interest in the role of primary commodities in development. Was the boom in commodity prices from 2003 to 2008 just a cyclical event or does it represent a period of strength, driven by factors such as demand in fast-growing developing countries like China?

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Topics:  Development

Tags:  development, governance, resource curse

Elections in developing countries: do they improve economic policy?

Paul Collier, Lisa Chauvet 21 November 2009

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The relationship between democracy and development has been extensively debated. Most cross-country analyses suggest that democracy has no robust impact on growth.

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Topics:  Development

Tags:  elections, democracy, governance

Sovereign wealth funds, governance, and reserve accumulation

Joshua Aizenman, Reuven Glick 16 January 2009

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Sovereign wealth funds (SWFs) are saving funds controlled by sovereign governments that hold and manage foreign assets. While not a new phenomenon, the recent activities and projected growth of SWFs have stirred debate about the extent to which their size may allow them to affect financial markets and their policies may be driven by non-economic considerations.

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Topics:  International finance

Tags:  foreign exchange reserves, sovereign wealth funds, governance

Board (in)competence and the subprime crisis

Harald Hau, Johannes Steinbrecher, Marcel Thum 12 January 2009

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“Who were the first bank supervisory board members?” Answer: “The three Magi in the holy bible. They were politicians with time to spare, were dressed in expensive clothing, and did not really know where the journey was going!”

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Topics:  Europe's nations and regions Microeconomic regulation

Tags:  Germany, governance, bank supervisory board

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