Mouhamadou Sy, 09 November 2015

From the introduction of the euro in 1999 to the Greek crisis in 2010, the Eurozone witnessed external imbalances between countries at its core and those at its periphery. These imbalances have been attributed either to differences in competitiveness or to the effect of financial integration. This column argues that in order to understand the imbalances within the Eurozone, it is necessary to consider credit costs and capital flows. The lower real cost of credit for high-inflation countries must be taken into account, as well as the inflow of capital to the non-tradable sector that this implies. Monetary policy cannot be conducted in a ‘one size fits all’ manner.

Mark Gertler, Peter Karadi, 10 March 2015

Evidence of the impact of monetary policy on economic activity supports conventional models with nominal rigidities. This column highlights the importance of the ‘credit channel’ of monetary policy. Unanticipated tightening produces a significant drop in real activity. However, monetary policy responses produce large movements in credit costs, which are due to the reaction of term premia and credit spreads. Therefore, to account for credit costs, it might be necessary to amend macroeconomic models to control for term premia and credit spreads.


CEPR Policy Research