EU institutions

Daniel Gros, Angela Capolongo, 03 December 2019

The ECB is running out of options for addressing its twin problems of low inflation and negative interest rates, leading some, including outgoing President, Mario Draghi, to call on fiscal policy measures to be used. This column argues that a fiscal expansion would be ineffective in raising interest rates or inflation for any length of time. Not only would the effect be temporary, but the scale of expansion needed to effect any substantial change would be unfeasible. 

Andrés Rodríguez-Pose, Tobias Ketterer, 18 November 2019

Institutions are an important ingredient for economic growth. Using data from European regions for the period 1999-2013, this column shows that government quality matters for regional growth, and that relative improvements in the quality of government are a powerful driver of development. One-size-fits-all policies for lagging regions are not the solution. Government quality improvements are essential for low-growth regions, and in low-income regions, basic endowment shortages are still the main barrier to development. 

Philipp Hartmann, Glenn Schepens, 06 November 2019

On the occasion of the 20th anniversary of the euro, the experiences with EMU so far and crucial factors for its success going forward were at the core of ECB’s 2019 Sintra Forum on Central Banking. In this column two of the organisers highlight some of the main points from the discussions, including the diverse progress with economic convergence and how it may relate to the geographic agglomeration of industries, the role of fiscal policies relative to monetary policy for macroeconomic stabilisation in the still incomplete monetary union, and selected key determinants of future growth in the euro area. 

Francesco Corsello, Stefano Neri, Alex Tagliabracci, 05 November 2019

Concerns about the anchoring of long-term inflation expectations to the ECB Governing Council’s aim have re-emerged since early 2019. Using data from the ECB’s Survey of Professional Forecasters, this column argues that long-term inflation expectations have de-anchored from the ECB’s inflation objective. They have not returned to the levels that prevailed before the 2013-14 period of disinflation, and their distribution is still skewed towards lower inflation levels. Moreover, long-term expectations have become sensitive to short-term ones and to negative inflation surprises. 

Heikki Oksanen, 01 November 2019

Preparations for reforming the euro area have stalled, with experts disappointed that politicians have not heard their proposals. This column, however, is optimistic  that the euro area can be reformed via a pragmatic reorientation without high-profile changes to the EU Treaty. The reforms must cover a reorientation of fiscal policy towards a long-term vision and entail revamping the Eurosystem to allow it to perform its proper role as a central bank.

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