Christiane Nickel, Elena Bobeica, Gerrit Koester, Eliza Lis, Mario Porqueddu, Cecilia Sarchi, 25 November 2019

Wage growth in the euro area over 2013 to 2017 was subdued despite notable improvements in the labour market, leading some to claim a breakdown of the output–inflation relationship. This column presents comparative analyses of wage developments in the euro area, showing that the Phillips curve is alive and well and can be used to explain much of the weakness in wage growth during 2013-2017. Other factors also found to have played a role include compositional effects, the possible non-linear reaction of wage growth to cyclical improvements, and structural and institutional factors. 

Mario Monti, 04 November 2019

What would happen if another crisis were to occur? In this video, Mario Monti discusses potential differences and challenges. This video was recorded at the "10 years after the crisis" conference held in London, on 22 September 2017.

Willem Thorbecke, 02 October 2019

Japanese exports in electronic parts and components dramatically fell in value after the Global Crisis and have not recovered until today. This column investigates why Japan lost this comparative advantage. It argues that capital inflows seeking safe havens during the crisis led to a sharp appreciation of the yen and caused yen export prices to tumble relative to production costs. Plummeting profits then hindered Japanese firms from investing enough in capital and innovation to compete with rivals.

Hakan Yilmazkuday, 21 August 2019

During the Global Crisis, international trade decreased more than overall economic activity, despite standard trade models predicting a one-to-one relationship. This ‘Great Trade Collapse’ has been investigated extensively in the literature, resulting in alternative competing explanations. This column evaluates the contribution of each story using data from the US. The results show that retail inventories have contributed the most to the collapse and the corresponding recovery, followed by protectionist policies, intermediate-input trade, and trade finance. Productivity and demand shocks have played negligible roles.

Marcus Miller, Lei Zhang, 16 August 2019

Externalities can have a powerful effect on financial stability. This column studies the amplification effect that can operate despite value at risk regulation, which suffers from the ‘fallacy of composition’. It shows that the magnitudes of booms and busts are amplified by two significant externalities triggered by aggregate shocks: the endogeneity of bank equity due to mark-to-market accounting and of bank liquidity due to 'fire-sales' of securitised assets. In addition to economic models, legal and political factors should also be considered. 

Anne-Laure Delatte, Pranav Garg, Jean Imbs, 21 May 2019

The ECB's unconventional monetary policy package implemented in February 2012 changed collateral requirements. This column examines the effects in the French credit market, using data on corporate loans. Credit indeed increased after the liquidity injection, exclusively driven by supply. There was also strategic risk-taking by a group of banks, an unintentional implication of the policy.

Pascal Michaillat, Emmanuel Saez, 13 May 2019

Academics and policymakers alike have debated how to structure an optimal stimulus package since the Great Recession. This column revisits the arguments related to the size of the multiplier and the usefulness of public spending, and offers a blueprint for future stimulus packages. It finds that the relationship between the multiplier and stimulus spending is hump-shaped, and that a well-designed stimulus package should depend on the usefulness of public expenditure. The output multiplier is not a robust statistic to use, and instead the ‘unemployment multiplier’ should be used. 

Jeremy Bulow, 09 May 2019

Bank stress tests in the US were an important tool for bailing out banks in the Great Recession. As this column points out, however, because the tests use regulatory rather than market measures of asset values and risk they have almost nothing to do with whether a bank will be economically solvent under test conditions. This column argues that the thousands of pages of post-crisis bank regulation have largely ignored perhaps the two most needed reforms: measuring asset values and risks in an economically realistic way. Reforming the stress tests is necessary for clearly and credibly placing responsibility for future banking losses in the private sector and for improving incentives for both managing old risks and for investing in new ones. 

Wilko Bolt, Kostas Mavromatis, Sweder Van Wijnbergen, 25 April 2019

Increasing protectionism will slow down world trade and may dampen global economic growth. This column examines the global macroeconomic consequences of a major trade conflict between the US and China, and shows that the two countries would be the biggest losers from a 10% ‘tit-for-tat’ trade war between them. As long as it does not get involved in the conflict, the euro area may temporally gain from trade diversion, as competitiveness improves and imports from regions whose exports are blocked elsewhere become cheaper.

David Martinez-Miera, Rafael Repullo, 27 March 2019

Various factors have been advanced as possible causes of the build-up of risks leading to the Global Crisis, and multiple policies have been put forward to address them. This column discusses the effectiveness of monetary policy and macroprudential policy in responding to the build-up of risks in the financial sector. While both policies are useful, macroprudential policy is more effective in terms of financial stability and can lead to higher welfare gains.

Sanjiv Das, Kris Mitchener, Angela Vossmeyer, 11 March 2019

The Global Crisis brought attention to how connections among financial institutions may make systems more prone to crises. Turning to a major financial crisis from the past, this column uses data from the Great Depression to study risk in the commercial banking network leading up to the crisis and how the network structure influenced the outcomes. It demonstrates that when the distribution of risk is more concentrated at the top of the system, as it was in 1929, fragility and the propensity for risk to spread increases.

Natasha Kalara, Lu Zhang, Karen van der Wiel, 09 March 2019

The Global Crisis has profoundly changed the financial landscape, including firm financing. This column examines the development of various channels of firm financing before and after the crisis among four groups of EU countries, the US, and Japan. While bank finance and, to some extent, equity finance are under pressure, alternative finance, although small, seems to be on the rise.

Gaston Gelos, Federico Grinberg, Shujaat Khan, Tommaso Mancini-Griffoli, Machiko Narita, Umang Rawat, 28 February 2019

There is little evidence on whether deteriorating household balance sheets in advanced economies have made monetary policy less effective since the Global Crisis. Using US household-level data, this column shows that the responsiveness of household consumption to monetary policy has in fact diminished since the crisis, and that households with the highest indebtedness responded the most to monetary policy shocks. Since the distribution of debt did not change after the crisis, this suggests that household debt did not contribute to lessening the effects of monetary policy over time. 

Sebnem Kalemli-Ozcan, 13 February 2019

Şebnem Kalemli-Özcan of the University of Maryland talks about debt overhang as a big contributor to the low investment that persists in Europe ten years after the crisis, and why a big data approach is the best way to solve the problem.

Giancarlo Corsetti, Aitor Erce, Timothy Uy, 13 February 2019

During the euro area crisis, management of official loan maturities emerged as a critical item in the discussion on which instruments and strategies are most effective at ensuring debt sustainability. Using a theoretical model calibrated to Portugal and cross-country data, this column shows that lengthening loan maturities and managing debt repayment flows has substantial effects on sustainability. It also unveils a key policy trade-off in official lending between increasing the amount of safe debt (immune from rollover risk) and strengthening the incentive to default in response to negative shocks to fundamentals.

Dirk Schoenmaker, 08 February 2019

Leveraged finance is booming, just as it was in the run-up to the Global Crisis. As before, central banks are bystanders, with only banking instruments for macroprudential policy. this column argues there are unused regulatory powers that can rein in investment funds. A cross-sectoral approach would help to rein in the current unsustainable levels of leveraged finance.

Nicholas Crafts, 15 January 2019

Brexit in 2019 and the banking crisis in 2007 to 2009 are usually seen as unrelated events. This column argues that they are in fact closely connected. The austerity policies embarked on in response to the fiscal damage resulting from the banking crisis triggered the protest votes of left-behind voters, which at the margin allowed Leave to win the referendum vote. The implication is that the economic costs of the banking crisis are much larger than is usually supposed.

Ashoka Mody, Milan Nedeljkovic, 14 January 2019

The ECB’s actions in the wake of the Global Crisis have been described as hesitant, relative to other central banks. Based on analysis of financial markets' response to the ECB's interventions during the euro crisis, this column argues that central bank interventions are effective if they clearly signal a commitment to reinvigorating the economy and if they address the source rather than the symptom of financial stress. The ECB did not follow these principles, limiting its ability to improve financial market sentiment. 

Mathias Hoffmann, Egor Maslov, Bent Sørensen, Iryna Stewen, 10 January 2019

Bank-to-bank lending in the euro area has increased, direct cross-border lending has not. The column shows that dependence on domestic banks reduces risk-sharing in a crisis, reducing GDP growth in affected country-sectors. Benefits from banking integration are only robust to global shocks if banking integration takes the form of cross-border lending to firms and households.

Emmanuel Dhyne, Jozef Konings, Jeroen Van den bosch, Stijn Vanormelingen, 07 January 2019

Although information technology has reshaped the way businesses operate, measuring IT capital in firms is challenging. Using an exceptionally rich firm-level dataset from Belgium, this column finds that large firms benefit more from IT than small firms, and that IT explains about 10% of the productivity dispersion. IT has contributed to Belgian GDP and productivity growth prior to the Global Crisis, but the recession seems to have led firms to forgo investment in IT. Achieving optimal IT investment levels could reinvigorate productivity growth.



CEPR Policy Research