Macroeconomic policy

Lorenzo Codogno, Giancarlo Corsetti, 18 September 2020

The EU Recovery Plan agreed upon in July 2020 supports investment activity through grants and loans to member states at close-to-zero interest rates. This column suggests that its implementation could give a substantial boost to the economy and fiscal revenues under very conservative assumptions on multipliers. In addition, as the ECB is keeping interest rates and government bond yields low, also through its asset purchase programmes, if it refrains from reacting forcefully to potential upward pressures on prices caused by the massive fiscal stimulus, even a gradual and delayed ‘normalisation’ of interest rates would not undermine debt sustainability. 

Richard Button, Marek Rojicek, Matt Waldron, Danny Walker, 07 September 2020

The spread of Covid-19 and the measures taken to contain it have led to a sharp fall in economic activity, which has put pressure on many companies’ cash flows.  This column estimates a cash flow deficit summing to £135 billion for the 2020-21 financial year for mid-size and large UK companies. Supported by public policy, UK companies have already raised a large amount of external finance, providing them with liquidity to help bridge some of the disruption.  But additional liquidity will be required and equity finance will likely be important during the recovery phase.

Silvana Tenreyro, 04 September 2020

Understanding the nature of the global economy remains an important and interesting topic of discussion for both policymakers and researchers. This column presents a summary of two recent evaluations of aspects of the open economy. The author summarises work concerning global currencies and trading networks, offering insights into how the research agenda on each area may evolve over the coming years. 

Felix Montag, Alina Sagimuldina, Monika Schnitzer, 25 August 2020

To combat the consequences of the COVID-19 pandemic, the German government unveiled an unprecedented stimulus package on 3 June which, among other policies, includes a temporary reduction of value-added tax rates between July and December 2020. The aim of this policy is to temporarily lower prices and stimulate consumption through higher inflation expectation. This column presents the first estimates of the pass-through rate for a major sector of the economy. It shows that for retail fuel, pass-through was fast, substantial, but incomplete, with pass-through rates depending on the competiveness of the relevant market.

Bilge Erten, Anton Korinek, José Antonio Ocampo, 11 August 2020

Recent market volatility has underlined how fickle international capital flows can be, and how important it is for emerging economies to have an adequate system of macroprudential policies in place. Capital controls that protect recipient countries from excessively risky types of flows are a crucial ingredient of such a system. This column motivates capital controls theoretically based on the existence of externalities from capital flows, describes recent empirical evidence on their use, and summarises the surrounding policy debate.

Other Recent Articles:

Events

CEPR Policy Research