Christiane Nickel, Derry O'Brien, 20 November 2018

Just like other central banks, the ECB generally monitors a range of measures of underlying inflation to help distinguish noise from signal in headline inflation. This column describes measures of underlying inflation that are routinely used at the ECB for measuring euro area headline inflation and provides some insights on their interpretation. Each of the measures has merits and shortcomings and they should be taken together in arriving at a first-pass assessment of developments in headline inflation. At the same time, the measures need to be complemented by a more structural examination of their driving forces in order to better understand the inflation process.

Marco Buti, Björn Döhring, 08 November 2018

GDP growth has become more uneven globally, and has shifted into a lower gear in Europe. So it is unsurprising that commentators have started warning about a more severe downturn. The Commission's autumn 2018 European Economic Forecast is no exception in highlighting an unusual amount of uncertainty clouding the economic outlook. The predominance of downside risks implies that macroeconomic outcomes could ex post be worse than our central scenario. This column discusses, on the basis of concrete examples, different types of uncertainty surrounding the still benign forecast baseline. Prudence requires economic policy to prepare for the eventuality of worse outturns. 

Marcos Chamon, Julian Schumacher, Christoph Trebesch, 06 November 2018

Do investors care about the legal characteristics of sovereign debt? Focusing on the euro area, this column compares sovereign bonds issued under domestic law  to those issued under a foreign jurisdiction, which are harder to restructure in a debt crisis since they are out of reach of the borrowing country’s legislature. This legal protection means that foreign law bonds trade at a premium (with lower yields), but only in situations of severe distress such as Greece or Portugal in 2011/2012. In the midst of a crisis, governments can borrow more cheaply by issuing in foreign law. 

Matteo Leombroni, Andrea Vedolin, Gyuri Venter, Paul Whelan, 18 October 2018

It has been argued that central bank announcements can simultaneously convey both optimism and pessimism. This column explores the issue by looking at the effects of ECB communications on euro area bond yields. It finds direct evidence that monetary policy not only affects long-term rates through expectations of future short-term rates, but also by influencing the risk premia investors need in order to hold long-term bonds. 

Christian Bayer, Chi Hyun Kim, Alexander Kriwoluzky, 06 September 2018

Investors fret that Italy may exit the euro. One reason to worry is redenomination risk, driven by the prospect of a country allowing a new currency to depreciate against the euro. This column compares two types of Italian bond yield curves to estimate such risk, and finds that the yield premium due to it peaked at 7% during the sovereign debt crisis. Redenomination risk also affects interest rates in strong economies, which implies a redistribution between savers and borrowers throughout the euro area.

Simon Wren-Lewis, 03 September 2018

Miguel Ampudia, Dimitris Georgarakos, Michele Lenza, Jiri Slacalek, Oreste Tristani, Philip Vermeulen, Gianluca Violante, 14 August 2018

Quantitative easing has recently been shown to affect households differently depending on the composition of their income and wealth. Using euro area data, this column reviews the relevance of the direct and indirect effects of monetary policy on households’ incomes, which varies depending on employment status. The indirect income channel is found to be quantitatively more powerful, and especially beneficial for households holding few or no liquid assets. This implies that expansionary monetary policy in the euro area has led to a reduction in inequality. 

Massimo Bordignon, Nicolò Gatti, Massimiliano Onorato, 27 July 2018

While it was obvious at the time of the introduction of the euro that the euro area did not satisfy the criteria for an optimal currency area, increased economic convergence was expected to make it easier to introduce the institutional reforms necessary to converge into a fully-fledged political union. This column examines convergence among early EMU entrants in terms of public services, product and labour markets regulation, and quality of institutions. The main message is pretty clear: the viability of the EMU project seems to be more in trouble on political rather than economic grounds.

Marco Buti, András Chabin, Björn Döhring, João Leal, 13 July 2018

Next week, after ten days of swift, flat riding, the Tour de France reaches the Alps. The European economy, meanwhile, has been pedalling uphill since the beginning of this year. 2017 was easy riding as strong global growth boosted domestic investment, but economic growth has had to move into lower gear in the first half of 2018 as this transmission is no longer working properly, and escalating trade conflicts could derail it. This column presents the European Commission’s Summer 2018 Interim Forecast, which suggests that a tightening of global financial conditions could add to the headwinds, though central banks' balance sheets will remain large for a long time, and domestic fundamentals in the euro area remain strong. 

Stephen Byrne, Jonathan Rice, 19 June 2018

While the effect of Brexit on trade between the UK and the remaining EU member states has received considerable attention, to date little work has considered the issue of non-tariff barriers. This column explores how increased documentary compliance and border delays will affect EU members’ exports to the UK. Time-sensitive goods are found to be most at risk of suffering from increases in non-tariff barriers. Based on current trade composition, Latvia, Ireland, and Denmark are the trading partners that will be most affected.

Guntram Wolff, 04 May 2018

When thinking about what will determine the prosperity and well-being of citizens living in the euro area, five issues are central. This column, part of VoxEU's Euro Area Reform debate, argues that the important CEPR Policy Insight by a team of French and German economists makes an important contribution to two of them, but leaves aside some of the most crucial ones: European public goods, a proper fiscal stance and major national reforms. It also argues that its compromise on sovereign debt appears unbalanced.

Marco Buti, Reuben Borg, 04 May 2018

It is ten years since the crisis started and Europe is at the cusp of new and different challenges. This column presents the European Commission's spring forecast and the challenges ahead that policymakers should address. The baseline scenario for the European economy over the next two years is one of continued expansion. However, the assessment of risks to the forecast has changed, and the nuances have become more critical. Domestic upside risks have broadly diminished and downside risks to the global outlook have increased significantly in both the short and the medium term.

Ramon Marimon, Thomas Cooley, 01 May 2018

The Horizon 2020 ADEMU project has aimed to reassess the fiscal and monetary framework of the Economic and Monetary Union in the wake of the euro crisis. This column introduces a new VoxEU ebook which presents the main findings from the project, including the lessons we can extract from the crisis and the policy response. It also outlines the two main proposals arising from the project relating to the European Stability Fund and a European Unemployment Insurance System.

Marco Buti, Gabriele Giudice, José Leandro, 25 April 2018

The debate on deepening EMU is entering a critical stage. This column, contributing to VoxEU's Euro Area Reform debate argues that while the proposals in a recent CEPR Policy Insight are both timely and attractive, the mix seems unbalanced and carries significant risks. The focus of the proposals on reducing fiscal risks could lead to financial distress, ultimately requiring more, not fewer, rescues.

Ashoka Mody, 25 April 2018

Since Emmanuel Macron’s election as French president in May 2017, hope has lingered that a mythical friendship between France and Germany will help complete the gaps in the euro area architecture. As this column discusses, however, history provides no basis for such an expectation. National interests, always central to the decision calculus, have diverged even further. French leaders have a pressing task at hand: they need to rejuvenate their own economy and build domestic social cohesion. This may take a generation or more. 

Sebastian Dullien, 11 April 2018

The recently published CEPR Policy Insight by a team of French and German economists proposes a package of reforms to make progress on risk sharing and risk reduction in the euro area. This column, which forms part of VoxEU's Euro Area Reform debate, argues that while many of the package’s elements make sense, it leaves too many questions open and fails to address a number of central problems of EMU architecture.

Lorenzo Bini Smaghi, 09 April 2018

A team of French and German economists recently proposed on this site a series of reforms to strengthen the euro area's institutional framework. This column, which joins VoxEU's Euro Area Reform debate, argues that while the proposals  form a useful basis for discussion, they are nevertheless subject to important shortcomings.

Tolga Aksoy, Paolo Manasse, 23 March 2018

After 2008, labour markets in the euro area responded differently to the recessions and subsequent labour market reforms. This column uses data from 19 countries to show that labour and product market reforms speeded up the recovery from recession, but also reduced the resilience of employment to shocks. Because the resilience effect occurs first, deep reforms risk losing public support.

Nauro Campos, Corrado Macchiarelli, 12 March 2018

The concepts of core and periphery remain ubiquitous and elusive in the European integration debate. This column documents the formation and evolution of a core and periphery in EMU, unearthing an increasingly integrated core, an entrenched periphery, and a third set of countries marked by in-and-out movements.  Using a novel measure to capture the probability of a country being classified as peripheral, it reveals that this probability positively correlates with euro membership and flexible product market regulations.

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