Jan Willem van den End, Marco Hoeberichts, 25 April 2018

Persistent low interest rates prompt the question of whether the natural, or equilibrium, rate of interest has similarly shifted downwards. This column uses data for seven OECD countries to explore how low interest rates have affected potential output. The results lend support to concerns that a prolonged period of low real interest can reduce the natural rate. This causality can run through both real and financial channels.

Ashoka Mody, 25 April 2018

Since Emmanuel Macron’s election as French president in May 2017, hope has lingered that a mythical friendship between France and German friendship will help complete the gaps in the euro area architecture. As this column discusses, however, history provides no basis for such an expectation. National interests, always central to the decision calculus, have diverged even further. French leaders have a pressing task at hand: they need to rejuvenate their own economy and build domestic social cohesion. This may take a generation or more. 

Rabah Arezki, Raouf Boucekkine, Jeffrey Frankel, Mohammed Laksaci, Rick van der Ploeg, 24 April 2018

After years of high commodity prices, a new era of lower ones, especially for oil, seems likely to persist. This will be challenging for resource-rich countries, which must cope with the decline in income that accompanies the lower prices and the potential widening of internal and external imbalances. This column presents a new VOXEU eBook in which leading economists from academia and the public and private sector examine the shifting landscape in commodity markets and look at the exchange rate, monetary, and fiscal options policymakers have, as well as the role of finance, including sovereign wealth funds, and diversification.

Ambrogio Cesa-Bianchi, Hashem Pesaran, Alessandro Rebucci, 24 April 2018

During 2016-17, market analysts and policymakers grappled with the puzzling coexistence of subdued market volatility and heightened policy uncertainty and geopolitical risk. The rise in world growth expectations can explain some but by no means all of the decline in market volatility during this period. This column argues that excess optimism about future growth prospects might have fuelled the decline in volatility. This would imply that gradual unwinding of such expectations could bring more bursts of market volatility, as we have begun to witness since the start of 2018.

Andrew Watt, 23 April 2018

There is currently both an economic and a political window of opportunity for reform in the euro area. This column, which forms part of VoxEU's Euro Area Reform debate, discusses the strengths and weaknesses of the proposals in the recent CEPR Policy Insight and makes recommendations for extensions and alternatives.

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