Grexit and the reintroduction of the drachma would have severe consequences for the Greek people. This column argues, based on Argentina's experience, that this would produce a sharp devaluation of the drachma, inflation, and a severe reduction in real wages and pensions. The effects would be far worse than the reductions that could have occurred as a consequence of the policies proposed by the Troika. By resuming negotiations, continuing with measures to achieve fiscal consolidation and carrying out adequate structural reforms, Greece could reverse the current situation in a sustainable way. It has the great advantage that the ECB, most European governments and the IMF are willing to resume negotiations.
Economics in Europe has seen impressive growth in recent years. But European economic research still lags behind the US in terms of productivity. This column discusses a new research project, ‘COEURE’, that will study the state of economic research in Europe and the mechanisms by which it is funded.
Most theories explain the volatility of the stock market with shocks to macroeconomic fundamentals that have important consequences for growth. This column argues that the most important forces behind the longer term gains in the US stock market have not been drivers of economic growth. Instead, they have been an accumulation of random shocks which resulted in redistribution between workers and shareholders.
Japanese firms have been struggling with the yen’s volatility ever since the peg was dropped in 1973. This column, based on a recent survey of Japanese firms, argues that many firms have managed their exchange rate exposure by using operational and financial hedging strategies. It also finds that firms employing currency hedge and invoicing exports in yen are judged by the market to have reduced currency exposures.
This weekend’s dramatic events saw the ECB capping emergency assistance to Greece. This column argues that the ECB’s decision is the last of a long string of ECB mistakes in this crisis. Beyond triggering Greece’s Eurozone exit – thus revoking the euro’s irrevocability – it has shattered Eurozone governance and brought the politicisation of the ECB to new heights. Bound to follow are chaos in Greece and agitation of financial markets – both with unknown consequences.
Other Recent Columns:
- Greece – the day after: Time for a fresh start
- Explaining the black-white wage gap
- Ancestry and culture
- Linkages and economic development
- Economic networks for more innovative and resilient economies
- Interpreting the yield curve: Pessimism or precaution?
- Trade and growth – end of an era?
- TPP now in sight
- Sutton-esque dominance in football
- Networking, context and firm-level innovation
- Government spending multipliers and the business cycle
- Optimal liquidity provision: Alternative views from the past
- Don’t sweat the debt if fiscal space is ample
- Measuring the health impact of airborne particulates
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- Recent Vox columns on the Greek Crisis
- VoxEU told you so: Greek Crisis columns since 2009
- Greece: Seizing the Crisis’s reform opportunities
- Central banks and sovereign debt crises: New evidence
- Consumers' activism: The Facebook boycott of cottage cheese