Guillermo Calvo, 04 August 2010

The debate over fiscal policy has reached a fork in the road. One way leads to maintaining or increasing the fiscal stimulus. This column argues that policymakers should take the other path. This would mean phasing out government expenditure while phasing in social protection programmes at the risk of a double-dip recession but potentially resulting in a more vibrant economy.

Andrew Rose, Mark Spiegel, 02 August 2010

The global crisis has left many calling for early warning systems to prompt authorities into action before it’s too late. This column argues that such a system is restricted by our understanding of what caused the crisis in the first place. Indeed, it shows that popular explanations for the current crisis have little to no ability to predict past crises.

Bernard Hoekman, 30 July 2010

Bernard Hoekman of the World Bank talks to Viv Davies about the Vox eBook on rebalancing the global economy. They discuss why imbalances persist, what can be learned from history and the need for a more collective responsibility in responding to the current problem. Hoekman highlights the importance of supply-side factors as well as the implications of imbalances for developing countries. Regarding the current debate on austerity versus stimulus, Hoekman maintains that the real issue is more about timing and coordination. The interview was recorded in July 2010.

Luiz de Mello, Pier Carlo Padoan, 01 August 2010

Global imbalances are firmly back on the policy agenda. This column examines evidence from past imbalances that suggests that the current-account reversals can be sizeable and the resulting disruption to capital flows could pose risks for the global recovery.

Barry Eichengreen, Peter Temin, 30 July 2010

The world economy is experiencing tensions arising from inflexible exchange rates – particularly the dollar-renminbi peg and the Eurozone. Drawing on lessons from the gold standard, this column points out that an international monetary system is a system – nations’ policies have spillovers. Now, as in the 1930s, surplus nations’ refusals to increase spending force deficit countries to contract. Keynes drew this lesson from the Great Depression, which is why he wanted measures to deal with chronic surplus countries. Sixty-plus years later, we seem to have forgotten his point.

Stefan Gerlach, John Lewis, 27 July 2010

Monetary policy during the global crisis entered unchartered territory. This column suggests that fear of a global recession may have led policymakers to cut rates more aggressively in order to prevent the need for negative interest rates.

Agustin Bénétrix, Barry Eichengreen, Kevin O'Rourke, 21 July 2010

The world's current economic problems started when housing bubbles burst in several advanced economies. Economic recovery without housing market recovery is unlikely to be sustained. This column presents new research on the probability of housing slumps ending. There is at least a one-in-eight chance of housing slumps in the three big economies (US, Japan and Germany) ending imminently, but there is nothing approaching the same probability elsewhere. If things turn out as projected here, we may be about to have a test of the locomotive theory – whether the big economies can pull along their smaller brethren – both for housing markets and generally.

Alessandro Turrini, Uwe Böwer, Julia Lendvai, 21 July 2010

In 2009 the Baltic countries were hit by record recessions. Growth rates fell to -14% in Estonia, -18% in Latvia, and -15% in Lithuania. This column argues that structural adjustment towards the tradable sector is needed not only for a durable adjustment of their external position, but also for sustained growth in the long run – and sooner, rather than later.

Francesco Giavazzi, Alberto Giovannini, 19 July 2010

Should the crisis spur central banks to change how they conduct monetary policy? This column argues that strict inflation targeting, which ignores financial fragility, can produce interest rates that push the economy into a “low-interest-rate trap” and increase the likelihood of a financial crisis.

Cédric Tille, Philippe Bacchetta, Eric van Wincoop, 19 July 2010

Why did the world economy plunge into the worst recession since the Great Depression? This column argues that economic fundamentals do not explain the global crisis. But they did play a role. Events such as the fall of Lehman Brothers can become focal points for investors’ risk perceptions, changing the way the fundamentals are interpreted. This can lead to “risk panics” – self-fulfilling spikes in risk and a collapse in asset prices.

Atif Mian, Amir Sufi, Francesco Trebbi, 11 July 2010

Is the US government to blame for the subprime crisis and by extension the global crisis? This column presents a unique study of how vested interests, measured by campaign contributions from the mortgage industry and the share of subprime borrowers in a congressional district, influenced US government policy during in the build up to the subprime crisis and subsequent global crisis.

Stijn Claessens, Richard Herring, Dirk Schoenmaker, 08 July 2010

Financial reform is finally emerging in the major economies but these reforms come up short on one crucial aspect – the resolution of systematically important, i.e., ‘too complex to fail’, cross-border financial institutions. The latest Geneva Report on the World Economy advocates a two-tier solution to this problem – a universal approach for closely integrated countries such as EU members, and a modified universal approach for other countries.

Stijn Claessens, Richard Herring, Dirk Schoenmaker, 08 July 2010

The major economies' financial reforms come up short on one crucial aspect – the resolution of systematically important cross-border financial institutions. This column introduces the latest Geneva Report on the World Economy, which advocates a two-tier solution to this problem – a universal approach for closely integrated countries such as EU members and a modified universal approach for other countries. It explicitly rejects the territorial or go-it-alone approach.

Jonathan Eaton, Samuel Kortum, John Romalis, Brent Neiman, 07 July 2010

The great trade collapse during the global crisis has reignited interest in the relationship between trade and GDP over the business cycle. This column argues that trade patterns in the recent recession largely reflected the shift away from demand for durable goods, although increasing trade frictions did play a moderate role in some countries.

Giancarlo Corsetti, 07 July 2010

Are governments right to start cutting their deficits? This column presents good news and bad news. It supports a strongly precautionary approach to fiscal consolidation, but warns of the macroeconomic costs that come with each additional cut in the deficit. The financial crisis is not over yet.

Jeffrey Frankel, George Saravelos, 01 July 2010

Can “early warning indicators” predict which countries are most vulnerable to a crisis? This column argues that, contrary to findings released last year, early warning indicators were useful in identifying which nations were hit hardest by the Global Crisis from 2008 to 2009. The authors argue that the level of central bank reserves was particularly useful. Other useful early warning indicators include real effective exchange rate overvaluation, current accounts, and national savings.

Beatrice Weder di Mauro, Ulrich Klüh, Marco Wagner, Hasan Doluca, 26 June 2010

As G20 leaders meet to discuss financial reform, this column argues that it is not too late for an international solution. It says that the EU and US should lead the way with a tax on systemically important financial institutions. Beyond internalising the costs of systemic risk, such a levy would make an international agreement more likely and raise substantial funds.

Otaviano Canuto, José Manuel Salazar, 28 June 2010

Economic integration transmitted the negative shocks of the crisis to workers across the world. As the global economic recovery begins, this column says that there is no cause for complacency or celebration. It warns that unemployment rates are expected to remain high in many countries and recommends designing government policies so that more may share in the gains from globalisation.

Simon Evenett, Stijn Claessens, Bernard Hoekman, 23 June 2010

The global balances are a thorn in the side of the G20. This column launches a new eBook with the aim of providing policymakers and their advisers with up-to-date, comprehensive analyses of the central facets of global economic imbalances and to identify and evaluate potential national and systemic responses to this challenge.

Bernard Hoekman, 19 June 2010

The world is emerging from a severe global economic crisis. This column argues that maintaining an open trade regime is an important foundation for global recovery and the necessary reorientation of global supply and demand. This is especially true for developing countries as so many depend on export markets to finance growth-stimulating imports of goods, services, and technologies.

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