Kris Mitchener, Joseph Mason, 15 June 2010

Many commentators have compared the global crisis to the Great Depression. This column explores lessons that can be applied to help shape expectations and guide exit policy for central banks. It argues that the need for credit stimulus should end when failed intermediaries are resolved and positive net present value credits are reallocated to solvent lenders.

Thorsten Beck, 16 June 2010

Will the upcoming Financial Reform Bill in the US help prevent the next crisis or at least reduce its probability? This column argues that the answer is a firm “no”. It says this is not because the reform steps are damaging or wrong, but simply because they only provide the framework and do little to change incentives for banks and regulators.

Kati Suominen, 14 June 2010

Did global imbalances cause the global crisis? This column summarises the variety of explanations of the relationship between imbalances and the crisis. While the debate continues, it suggests that, as a matter of prudence, policies to contain global imbalances may still be warranted even if they did not trigger the crisis.

Eswar Prasad, Karim Foda, 08 June 2010

Is the worst of the crisis behind us, or is this just the eye of the storm? This column provides a snapshot from a new index provided jointly by the Brookings Institution and the Financial Times known as TIGER – Tracking Indices for the Global Economic Recovery. It argues that while some dark clouds remain, the economic picture looks far better now than it did a year ago.

Thorsten Beck, Thomas Losse-Müller, 31 May 2010

The global crisis has exposed the frailty of financial sectors the world over and highlighted the need for regulatory reform. This column argues that taxing banks is no panacea. The only way to achieve financial stability and financial integration in Europe is to move towards a European-level bank resolution framework that has both funding and intervention authority.

Ari Aisen, Michael Franken, 28 May 2010

What factors determined the performance of bank credit during the global crisis? This column presents evidence from 83 countries suggesting that credit booms prior to the crisis led to a sharper contraction in bank credit after the crisis. Meanwhile, the growth performance of a country’s main trading partners had a positive impact on bank credit – as did monetary policy.

Simon Evenett, 28 May 2010

Despite the return of economic growth, the threat of protectionism still lingers. This column presents the fifth report from the Global Trade Alert with a focus on sub-Saharan Africa. The report is the busiest yet – the number of identified protectionist measures has risen by 40%. No four-digit product line, no economic sector, and no jurisdiction have emerged unscathed by crisis-era protectionism.

Ross Levine, 25 May 2010

Many policymakers stress that the global crisis was caused by a series of unforeseen events and “suicidal” behaviour by market players. This column argues that this is a self-serving narrative. Policymakers designed, implemented, and maintained policies that destabilised the financial system in the decade leading up to 2006 – and were fully aware they were doing so. It is a case of “negligent homicide”.

Giorgio Barba Navaretti, Alberto Pozzolo, Giacomo Calzolari, Micol Levi, 23 May 2010

Many commentators have called for regulation to prevent banks from becoming “too big to fail”. This column adds a cautionary note. A world with only small and domestic banks is no safer. The key benefit of multinational banks – being able to mobilise funds across countries – could still be extremely useful for maintaining stability in times of distress.

Syed Basher, Ismail Dalla, Heiko Hesse, 22 May 2010

The countries of the Gulf Cooperation Council were hit hard by declining oil prices during the global crisis. This column argues that East Asia has shown how viable local bond markets are essential to weather future crises when bank lending collapses. While it will be a long process requiring strong political will, the time for the “plumbing” work is now.

Ricardo Caballero, 21 May 2010

Are policymakers on track to prevent a repeat global crisis? This column says the answer is probably “no”. It argues that the current financial reform efforts are mostly aimed at the symptoms rather than the underlying illness. The fundamental problem in the current global macroeconomic and financial equilibrium is one of a shortage of safe assets.

Anne Sibert, 18 May 2010

Investigation of Iceland's meltdown has revealed dodgy behaviours ranging from neglect to criminal fraud. This column describes how Icelandic banks issued “love letters” to each other – swapping their debt securities and using the other bank’s debt as collateral. This ruse ensnared not just the Icelandic Central Bank, but also the ECB – a fact that has only recently come to light. The ECB's lack of transparency on this is a serious problem.

Hans Peter Grüner, Markus Brückner, 16 May 2010

Will the global crisis lead to a rise in political extremism just as during the Great Depression? This column examines the vote share for extreme parties in a sample of 16 OECD countries over three decades. A one-percentage-point decline in growth leads to a one-percentage-point increase in the vote share for right-wing or nationalist parties.

Paul van den Noord, Ralph Setzer, Guntram Wolff, 15 May 2010

The monetary policy framework in the Eurozone emphasises the role of monetary aggregates, but less so their differences across member countries. This column argues that the surveillance of national monetary developments may prove useful, as they may have been masking diverging trends at the country level which had systemic financial stability implications for the Eurozone.

Ashoka Mody, Alina Carare, 13 May 2010

How has globalisation affected output growth volatility? This column presents findings from 22 OECD countries suggesting that while volatility reached a low in the mid-1990s, it has crept back up due the spillovers from otherwise domestic shocks. This increased sensitivity has been caused by the increased vertical specialisation in global trade. While beneficial for output, vertical specialisation is a double-edged sword.

Claudio Borio, 07 May 2010

Claudio Borio of the Bank for International Settlements (BIS) talks to Romesh Vaitilingam about where the pre-crisis consensus on monetary policy-making went wrong; the implementation, effectiveness and costs of ‘unconventional monetary policy-making’ in response to the crisis; the idea that it is no longer ‘better to clean than to lean’; and the research agenda for macroeconomics. The interview, which was recorded in April 2010, represents Claudio Borio’s personal views and does not necessarily reflect those of the BIS.

John Van Reenen, 04 May 2010

How can financial regulation be fixed to avoid another global crisis? This column argues that the “heads, I win; tails, society loses” moral hazard in the financial sector has to stop. To do this, policymakers must make bankruptcy credible. If a company has too much debt and becomes insolvent, it should suspend payments and its shareholders and creditors should lose their money.

Charles Wyplosz, 03 May 2010

Eurozone members, the IMF, and the ECB have announced significant commitments to assist debt-laden Greece. This column outlines a dark scenario in which the plan fails and contagion spreads, necessitating further assistance to other indebted Eurozone governments. That could risk high inflation or debt problems for the entire Eurozone.

Fabrizio Coricelli, 01 May 2010

Why have emerging economies weathered the crisis better than advanced countries? This column summarises a session given by Alan Winters, Saul Estrin, Thorsten Beck, and organised by Nauro Campos at the Royal Economic Society annual conference in March 2010. The contributions argue that the crisis may have long-lasting effects on migration, foreign direct investment, and financial development in Africa.

Price Fishback, 30 April 2010

Price Fishback of the University of Arizona talks to Romesh Vaitilingam about whether the current US economic situation is really comparable to the Great Depression. He argues that today’s monetary policy response is heavily and positively influenced by the failures of the past – but that today’s fiscal stimulus is far stronger than in the 1930s and out of proportion to the problem. The interview was recorded at a conference on ‘Lessons from the Great Depression for the Making of Economic Policy’ in London in April 2010.

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