VoxEU columns by Philip Lane: Irish Central Bank Governor to be

Richard Baldwin 20 October 2015

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Eurozone Crisis columns

This is Philip Lane’s latest contribution on the EZ Crisis. It is his chapter in the September 2015 Vox eBook: The Eurozone Crisis: A Consensus View of the Causes. In it he explains how he thinks about the causes of the Eurozone Crisis and possible cures.

International financial flows and the Eurozone crisis

Philip R. Lane, 7 September 2015

In the lead up to the global financial crisis, there was a substantial credit boom in advanced economies. In the Eurozone, cross-border flows played an especially important role in the boom-bust cycle. This column examines how the common currency and linkages between member states contributed to the Eurozone crisis. A very strong relationship between pre-crisis levels of external imbalances and macroeconomic performance since 2008 is observed. The findings point to the importance of delinking banks and sovereigns, and the need for macro-financial policies that manage the risks associated with excessive international debt flows.

The next is a very important contribution by Philip Lane with a stellar team of co-authors. It proposes a solution to the Eurozone’s debt legacy. Until something like this is done, EZ members will be wandering blindfolded through a minefield. Without a lender-of-last-resort and without the ability to devalue, nations with high debt ratio may find themselves sucked into public-debt vortexes of the type that pulled down Portugal and threatened Italy at the height of the Crisis.

A new CEPR Report: A New Start for the Eurozone: Dealing with Debt

Giancarlo Corsetti, Lars P Feld, Philip R. Lane, Lucrezia Reichlin, Hélène Rey, Dimitri Vayanos, Beatrice Weder di Mauro, 15 April 2015

The Eurozone’s problems of poor growth and the threat of financial instability are rooted in its very foundation. The authors of the inaugural Monitoring the Eurozone report, launched today, consider three means by which the Eurozone can protect itself from structural failure. Their recommendations, which do not require Treaty changes, are crucial in offsetting the major risks a repetition of the recent Crisis would present.

Here is an oldie that is not to be missed. The current Governor (Patrick Honohan) – writing before he was appointed – and Philip Lane discuss the looming Irish crisis in February 2009 (before the ECB forced the nation into a Troika Programme).

Ireland: How to fix the looming banking and public finance crises.

Patrick Honohan, Philip R. Lane, 28 February 2009

Ireland’s huge exports to GDP ratio and privileged position in global supply chains helped it grow rapidly in the 1990s, but are now amplifying its downturn. This column argues that Ireland’s looming banking and public finance crises can be fixed. The government must find new sources of tax revenue and craft a package in which all social partners can claim ownership.

This was pre-EZ Crisis, when all we had to worry about was the Global Crisis, which seemed to be a mostly US and UK problem in early 2009.

Here is Philip Lane’s contribution to the Global Crisis Debate that VoxEU.org hosted in the run up the London Summit in 2009 (i.e. the second G20 Leaders’ Summit). It shows his early thinking on the Crisis (March 2009).

The macroeconomics debate: A guided tour

Philip R. Lane, 26 March 2009

This column provides a tour of the main ideas discussed in the Macroeconomic theme of the Global Crisis Debate on VoxEU.org. Bottom line: fighting the current crisis and preventing future crises requires a holistic approach that tackles both short-term macroeconomic policy imperatives and longer-term institutional reforms. It is a false choice to argue that the upcoming summit should focus on one or the other. Fixing this crisis without redressing global imbalances may be setting the stage for the next crisis – a dollar collapse.

More general columns on macroeconomics and cross-border banking

Rethinking national fiscal policies in Europe

Philip R. Lane, 17 June 2010

The global crisis has developed into a fiscal crisis within the Eurozone. This essay argues that fiscal policy during normal times must be sufficiently sustainable and counter-cyclical to enable aggressive fiscal intervention in the event of a major negative shock. It says that the solution is to set up independent fiscal councils in Eurozone member countries.

Cross-border banking in Europe: Implications for financial stability and macroeconomic policies

Franklin Allen, Thorsten Beck, Elena Carletti, Philip R. Lane, Dirk Schoenmaker, Wolf Wagner, 20 June 2011

The global crisis has provided compelling evidence of the need to understand the role of banks in international finance. This column introduces a new CEPR report analysing key aspects of cross-border banking taking a European focus. The report argues that policy reforms in micro- and macro-prudential regulation and macroeconomic policies are urgently needed for Europe to improve its efficiency and reduce its risk.

Here are a couple of columns summarising reports he co-authored with an impressive list of economists. Note that Hyun Song Shin is now the Chief Economist at the Bank for International Settlements.

Banks and cross-border capital flows: Policy challenges and regulatory responses

Markus K Brunnermeier, José De Gregorio, Philip R. Lane, Hélène Rey, Hyun Song Shin, 7 October 2012

Many argue that the financial sector is in dire need of reform but there is always the danger of solving one problem by creating another. This column outlines the findings of the Committee for International Economic Policy and Reform. It takes stock of the traditional case for financial liberalisation and asks which principles have withstood the test of recent events and which ones now need re-thinking.

Deleveraging, What Deleveraging? The 16th Geneva Report on the World Economy

Luigi Buttiglione, Philip R. Lane, Lucrezia Reichlin, Vincent Reinhart, 29 September 2014

The world has not yet begun to deleverage its crisis-linked borrowing. Global debt-to-GDP is breaking new highs in ways that hinder recovery in mature economies and threaten new crisis in emerging nations – especially China. This column introduces the latest Geneva Report on the World Economy. It argues that the policy path to less volatile debt dynamics is a narrow one, and it is already clear that developed economies must expect prolonged low growth or another crisis along the way.

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Topics:  Macroeconomic policy

Tags:  Philip Lane, Central Bank Governor

Professor of International Economics at The Graduate Institute, Geneva; Founder & Editor-in-Chief of VoxEU.org; exPresident of CEPR

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