Pierluigi Bologna, Arianna Miglietta, Anatoli Segura, 29 October 2018

Proponents of contingent convertible bonds, or CoCos, argue that they are effective instruments for bank recapitalisation. Sceptics argue that they introduce too much complexity, with potentially destabilising consequences. This column addresses this dispute empirically, using the dynamics of the CoCo market in 2016. The CoCo market at the time exhibited adverse dynamics that can’t be explained by banks’ fundamentals. Though some of this instability may have been transitory, the findings imply that the market should be monitored as it develops.

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. 

Vincent Legroux, Imène Rahmouni-Rousseau, Urszula Szczerbowicz, Natacha Valla, 05 October 2018

Among the tools used by central banks to tame the financial crisis, some – such as haircuts applied by the central bank to the collateral posted at its provision of central liquidity to the banking system – have gone largely unnoticed. This column introduces a liquidity mismatch index to quantify the extent to which central banks effectively supported bank liquidity. The analysis suggests that in the case of French banks, the ECB alleviated banks’ liquidity mismatch significantly between 2011 and 2015.

Bert Smid, Beau Soederhuizen, Rutger Teulings, 10 September 2018

The transition to a European banking union is not straightforward. A key issue is how to prioritise risk sharing and risk reduction. This column examines three possible approaches, describing the respective transition scenarios and analysing the consequences for banks during the transition phase. None of the scenarios is optimal for all countries, but waiting too long may lead to solutions needing to be found under the pressure of a new crisis.

Philipp Hartmann, Peter McAdam, 29 October 2018

The origins and implications of the low inflation dynamics that characterised the post-crisis recoveries in many advanced economies were at the heart of the ECB’s 2018 Sintra Forum on Central Banking. In this column, two of the organisers highlight some of the main points from the discussions, including why measured economic slack did not translate into more vivid price and wage growth, which role inflation expectations play in the conduct of monetary policy, as well as where the challenges lie in reconciling changes in micro price-setting with aggregate inflation dynamics.

Martina Jasova, 10 August 2018

Financial institutions rely on borrowing at short maturities, but when credit markets panic, banks are unable to roll over their short-term debt. Martina Jasova discusses how the ECB’s Very Long-Term Refinancing Operations revived lending in the euro area following the financial crisis, which in turn allowed firms to invest and hire more. The video was recorded at CEPR's Third Annual Spring Symposium.

Antoine Levy, 22 July 2018

The euro improved the credibility of monetary policy for many member states, but the downsides of not having monetary autonomy became painfully apparent during the European debt crisis. This column proposes ‘targeted inflation targeting’ as a way to improve stabilisation mechanisms in the euro area, without losing the benefits of integration. The ECB would maintain a rules-based approach that targets countries in a weaker macroeconomic position more aggressively.

Jérémie Cohen-Setton, Shahin Vallee, 20 June 2018

The authors of the recent CEPR Policy Insight argue that the euro area needs an alternative to the current system of fiscal rules and financial penalties to discipline fiscally wayward members. This column, part of the VoxEU debate on euro area reform, argues that by not complementing their proposals with recommendations in the monetary realm, the authors have missed an opportunity to provide a balanced reform package that would not only increase fiscal discipline and risk sharing, but also enhance liquidity provision.

Thorsten Beck, 01 June 2018

Jeffry Frieden, 23 May 2018

For the euro area to be stable and move forward productively, substantial improvements in its operation are required. This column, part of the VoxEU Euro Area Reform debate, argues that the proposals in the recent CEPR Policy Insight are necessary if the euro area is to avoid another catastrophic crisis and that they would go a long way towards addressing the legitimate concerns of citizens in both the core and periphery of the euro area.

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.

Andrew Watt, 23 April 2018

There is currently both an economic and a political window of opportunity for reform in the euro area. This column, which forms part of VoxEU's Euro Area Reform debate, discusses the strengths and weaknesses of the proposals in the recent CEPR Policy Insight and makes recommendations for extensions and alternatives.

Emmanuel Farhi, Philippe Martin, 19 April 2018

One criticism of the recent CEPR Policy Insight on euro area reform is its supposed silence on the role of the ECB. In this column,  which we add to VoxEU's Euro Area Reform debate, two of the authors of the Policy Insight argue that the reforms proposed in it actually have significant implications for the ECB’s role, in a way that would make it easier for the ECB to fulfill its mandate.

Andrea Polo, 12 February 2018

European banks have responded in different ways to monetary interventions in the last few years. In this video, Andrea Polo discusses the central role monetary policy has taken in Europe, along with its limitations. While the ECB has created substantial liquidity through quantitative easing, these large injections of liquidity may not have been fully passed on to the real economy. This video was recorded at the RELTIF book launch held in London in January 2018.

Thomas Hasenzagl, Filippo Pellegrino, Lucrezia Reichlin, Giovanni Ricco, 15 January 2018

The ECB's Survey of Professional Forecasters supports the ECB’s view that inflation in the Eurozone will pick up and will be back within the central bank's target range in 2019.  This column disagrees.  Using a model that formalises the widely held view that inflation dynamics are a function of three components – long-term expectations, the Phillips curve, and oil price movement – it forecasts Eurozone inflation in 2019 at only 1.1%, a rate which is close to that implied by the bond markets.

Paul Krugman, 30 October 2017

What did we learn from the crisis? In this video, Paul Krugman explains why we might be in a worse situation than we were in 2007. This video was recorded at the "10 years after the crisis" conference held in London, on 22 September 2017.

Stefan Gerlach, 01 August 2017

With the Eurozone in recovery, at some stage the ECB will raise interest rates. This column examines the conditions that might lead to this happening. A statistical analysis suggests that the likelihood of an interest rate increase is currently about 7%, but a combination of stronger growth and higher price pressures could quickly raise this to about 30%. A return of the ECB to its pre-crisis behaviour would also lead to a dramatic rise in the likelihood of an interest rate increase.



CEPR Policy Research