Paolo Manasse, Dimitris Katsikas, 01 February 2018

The basic ingredients of the policy prescriptions in response to the euro area debt crisis were quite similar across Southern Europe. This column explores the economic, political, and institutional factors that differentially affected the success of these prescriptions from country to country. Policy timing and sequencing, the balance between fiscal consolidation and structural reforms, and external constraints all play crucial roles. Future reform programmes should be calibrated to the distinct economic, social, and political features of targeted countries.

, 07 December 2016

Why aren't individuals moving from low-productivity to high-productivity jobs? In this video, Sam Jones discusses the challenges of the labour market in Mozambique. This video was recorded at the UNU-WIDER Development Conference in September 2016.

Florin Bilbiie, Fabio Ghironi, Marc Melitz, 13 September 2016

Structural reform and deregulation are often promoted as ways to lower barriers to market entry. The Dixit-Stiglitz model provides an important benchmark – given specific preferences, there is a constrained-optimal amount of producer entry and product variety. This column reconsiders optimality of product creation, differentiating between consumer-producer and intertemporal inefficiencies and quantifying the welfare costs of inefficient entry. Monopoly profits should be preserved when product variety is endogenously determined by firm entry, as they play a crucial role in generating the welfare-maximising level of product variety in equilibrium.

Aida Caldera, Alain de Serres, Naomitsu Yashiro, 04 September 2016

Structural reforms can have adverse effects in the short run if implemented under weak macroeconomic conditions. This column argues that prioritising reform measures that bring short-term benefits even in a bad conjuncture, and packaging them to benefit from reform complementarities across product and labour markets, remains the most promising growth strategy, especially in the post-Global Crisis context

Tommaso Monacelli, 12 February 2016

The boom-bust cycle in the Eurozone between 2000 and 2008 is essentially a story of cyclical asymmetries between the Core and the Periphery. While stressing the importance of addressing these asymmetries – especially via fiscal policy – the ECB has failed to take them explicitly into account in its own policy-setting. This essay argues that these asymmetries may persist precisely because they are not a central target of stabilisation policy – both fiscal and monetary. 

M. Ayhan Kose, Franziska Ohnsorge, Lei (Sandy) Ye, 07 January 2016

Emerging markets face their fifth consecutive year of slowing growth. This column examines the nature of the slowdown and appropriate policy responses. Repeated downgrades in long-term growth expectations suggest that the slowdown might not be simply a pause, but the beginning of an era of weak growth for emerging markets. The countries concerned urgently need to put in place policies to address their cyclical and structural challenges and promote growth.

Nauro Campos, Fabrizio Coricelli, 17 July 2015

Greece’s reluctance to implement ‘the structural reforms required for debt sustainability’ is a recurrent theme in the debate on the EZ Crisis. This column qualifies this conventional wisdom by reassessing the relationship between Greece and the EU over the past four decades. Although Greece has implemented structural reforms that were substantial enough to bring about a turning point in its relationship with the EU, these reforms have been overly localised, badly sequenced and implemented by short-sighted political elites. The role that structural reforms can play in solving the current crisis should not be overestimated.

Paolo Manasse, 12 June 2015

Greece’s problem came from the bursting of a debt-financed growth bubble inflated with the help of EZ membership. This column argues that the inevitable adjustment was more painful than necessary. The fiscal consolidation was too tight and too front-loaded, and, importantly, structural reform wasn’t properly sequenced. By concentrating on labour market rather than product market reforms, the sharp wage fall could not be paralleled by a similar reduction in prices, and now soaring inequality is undermining support for needed reforms. 

Carlos Cantú, KeyYong Park, Aaron Tornell, 12 April 2015

The wisdom of structural reform during a crisis is a subject of heated debate. This column compares Greece’s experience to that of Mexico during the debt crisis of the 1980s. Mexico did not receive a haircut until seven years into the crisis – after structural reform was already underway. In Mexico that reform was the outcome of an internal conversation – not a diktat from the outside – and it happened during the height of the crisis.

Eric Bartelsman, Filippo di Mauro, Ettore Dorrucci, 17 March 2015

The shallow growth response to Eurozone rebalancing policies could point towards structural impediments. To uncover such impediments and design effective structural reforms, it is necessary to focus on the path from micro behaviour to macro outcomes. This column argues that firm-level data from the CompNet database can shed light on the impacts of structural reforms. 

Xavier Vives, 17 March 2015

The 2007–08 crisis revealed regulatory failures that had allowed the shadow banking system and systemic risk to grow unchecked. This column evaluates recent proposals to reform the banking industry. Although appropriate pricing of risk should make activity restrictions redundant, there may nevertheless be complementarities between these two approaches. Ring-fencing may make banking groups more easily resolvable and therefore lower the cost of imposing market discipline.

Lars Feld, Christoph Schmidt, Isabel Schnabel, Benjamin Weigert, Volker Wieland, 20 February 2015

Claims that ‘austerity has failed’ are popular, especially in the Anglo-Saxon world. This column argues that this narrative is factually wrong and ignores the reasons underlying the Greek crisis. The worst move for Greece would be to return to its old ways. Greece needs to realise that things could actually become much worse than they are now, particularly if membership in the Eurozone cannot be assured. Instead of looking back, Greece needs to continue building a functioning state and a functioning market economy.

Brian Pinto, 17 December 2014

Since the Global Crisis, concerns have grown that advanced economies are suffering from secular stagnation. This column discusses the lessons that can be learnt from the economic transition of central and eastern Europe and the emerging-market crises of the late 1990s and early 2000s. Structural reform is particularly costly in the context of a debt overhang and an overvalued exchange rate. However, the crux is not debt restructuring per se, but whether economic governance changes credibly for the better following it.

Miguel Cardoso, Rafael Doménech, 13 December 2010

Are concerns over the sustainability of sovereign debt in Europe justified? This column presents data covering 16 developed countries including Greece, Italy, Portugal, and Spain. It shows that these countries have worryingly low levels of human capital and income per head and argues that policymakers in these countries should press ahead with reforms to reassure investors of their future growth potential.

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