Global crisis

Nauro Campos, Paul De Grauwe, Yuemei Ji, 10 October 2018

The tragedy of structural reforms is that they have been captured by policymakers. This column argues that the incessant repetition of the ‘must-reform’ mantra as a solution to the crisis has discouraged academic economists from embracing it as the important research topic it clearly is, and attempts to address the lack of adequate knowledge which makes the implementation of reforms more difficult and limits their effectiveness. 

Lucia Alessi, Peter Benczur, Francesca Campolongo, Jessica Cariboni, Anna Rita Manca, Balint Menyhert, Andrea Pagano, 26 September 2018

Over recent decades, scholars and policymakers have been exploring how to make economies more resilient to potential shocks. This column investigates which EU members showed resilience during the Global Crisis and attempts to identify characteristics associated with resilience. The results reveal a lot of heterogeneity amongst countries, and those that are more resilient in the short run are not necessarily those with superior recoveries down the line. Further analyses show that social expenditures, political stability, and competitive wages are important for impact, medium-run, and ‘bounce forward’ resilience, respectively. 

Saleem Bahaj, Ricardo Reis, 25 September 2018

Swap lines between advanced economy central banks are a new and important part of the global financial architecture. This column analyses their role, from the perspective of central banks, in the transmission of monetary policy, and in the macroeconomic effects of policy. Results show that swap lines serve as liquidity facilities, that they put a ceiling on deviations from covered interest parity, and that they incentivise cross-border gross capital flows. 

Ester Faia, Sébastien Laffitte, Gianmarco Ottaviano, 20 September 2018

There is a general consensus that lax monetary policy and banking globalisation were two critical factors behind the Global Crisis. This column explores how banks’ decisions to enter foreign markets impacted their individual and systemic risk. Results from a sample of European banks suggest that banks’ foreign expansions decreased risk from both an individual and systemic viewpoint. The findings cast doubt on the idea that banking globalisation was one of the culprits behind the crisis.

Eugenio Cerutti, Stijn Claessens, Luc Laeven, 18 September 2018

The Global Crisis was a catalyst for the adoption of macroprudential policies around the world. Using newly updated data, this column examines the adoption of macroprudential policy instruments from 2000 to 2017. Since 2015, advanced economies have on average been using more instruments than emerging economies and low-income countries. While some instruments seem to be effective, it remains to be seen whether this suite of policies can deliver overall financial stability.

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