Wages, productivity, and employment in Italy

Paolo Manasse, Thomas Manfredi, 19 April 2014

Italy’s labour market productivity has been stagnating in the past decade despite numerous reforms. This column gives an explanation why this is so. By focusing exclusively on flexibility, past labour market reforms have completely neglected incentives. There is severe allocative malfunctioning in the Italian labour market. Wages do not reflect sector productivity in the short run, while in the long run they rise in sectors in which productivity falls. Thus, a comprehensive reform of the collective bargaining system is crucial.

Global Crises: Causes, Consequences and Policy Responses

Stijn Claessens, 18 April 2014

Stijn Claessens talks to Viv Davies about the recent IMF book titled 'Global Crises: Causes, Consequences and Policy Responses', co-edited with M Ayhan Kose, Luc Laeven, and Fabian Valencia. The book provides a comprehensive overview of current research into financial crises and the policy lessons learned. They discuss crisis prevention and management, and the crisis in the Eurozone. The interview was recorded in April 2014.

Has US household deleveraging ended?

Bruno Albuquerque, Ursel Baumann, Georgi Krustev, 18 April 2014

Household deleveraging in the US has impeded consumption and market activity in recent years, holding back the recovery. Despite substantial progress in balance sheet repair, a key question is whether deleveraging has ended or whether further adjustment is needed. This column presents time-varying equilibrium estimates of the household debt-to-income ratio determined by economic fundamentals. Taking into account the latest available data, the estimates suggest that the household deleveraging process may have ended at the end of 2013.

Derivatives and the Eurozone crisis

Anne-Laure Delatte, Julien Fouquau, Richard Portes, 17 April 2014

In retrospect, it is striking that the sovereign bond spreads of peripheral Eurozone countries surged while the economic conditions were gradually deteriorating. This column provides a new explanation for this phenomenon. It suggests that the markets in credit default swap indices have exacerbated shocks to economic fundamentals. The same change in fundamentals had a higher impact on the spread during the crisis period than it had previously.

Learning about global value chains by looking beyond official trade data: Part 2

Zhi Wang, Shang-Jin Wei, Kunfu Zhu, 16 April 2014

One common measure of trade linked international production networks is the so-called VAX ratio, i.e. the ratio of value-added exports to gross exports. This column argues that this measure is not well-behaved at the sector, bilateral, or bilateral sector level, and does not capture important features of international production sharing. A new gross trade accounting framework is proposed that can better track countries’ movements up and down global value chains.

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