Adam Elbourne, Kan Ji, Bert Smid, 13 March 2019

Previous research has shown that changes to the size of the ECB’s balance sheet were followed by meaningful changes in macroeconomic aggregates. This column argues that the econometric technique these studies employed does not provide reliable estimates. Impulse responses to purported balance sheet shocks are statistically indistinguishable from those from nonsensical identification schemes. The effectiveness of the ECB’s balance sheet policies is therefore still unproven.

Morris Goldstein, 18 November 2014

Results from last month’s EU-wide stress test are reassuring, especially for countries at Europe’s core. This column warns against a rosy interpretation. The test relies on risk-weighted measures of bank capital ratios that have been shown to be less predictive of bank failure than unweighted leverage ratios – a metric already adopted by the US Fed and Bank of England. In addition, many experts recommend much higher leverage ratios than currently required. The ECB must do more to fix undercapitalisation.

Gary Evans, Peter Allen, 24 April 2011

President of the European Central Bank, Jean Claude Trichet, was once head of the Paris Club – the group of government creditors who negotiated debt restructuring during the Latin American debt crisis of the 1980s. This column asks how such experience will help Europe now that the problems are on its doorstep. It introduces a Trichet Plan for the Eurozone.

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