EU policies

Máximo Camacho, Danilo Leiva-Leon, Gabriel Pérez-Quirós, 01 December 2015

Today's monetary policy effectiveness depends on expectations of future monetary policy. Shocks affect such expectations, but the nature of the shock matters. This column presents evidence that negative demand shocks lead markets to expect looser policy in the short run. Negative supply shocks lead to expectations of looser policy in the medium to long run. Unexpected expansions – from either the supply or demand side – have no significant influence on markets' expectations of future monetary policy.

Graciela Laura Kaminsky, 08 November 2015

The Eurozone crisis is still lingering. This column uses data from 100 years of sovereign defaults to portray a new take on the crisis. The findings indicate that crises in a financial centre have persistent adverse effects on the periphery. They lead to more economic losses than home-grown idiosyncratic crises. Successful restructuring of such crises would require substantially larger debt write downs than those following idiosyncratic crises.

Nicolas Véron, 08 October 2015

The EU has started conversations on a capital markets union, raising questions about integration of services such as finance. This column argues that regulated services are especially important for the European economy. Europeans will eventually be faced with a choice between maintaining sovereignty and building a single market. Whereas the ‘old’ single market in goods and unregulated services was satisfactorily addressed through standards harmonisation, the new single market challenge is all about regulatory enforcement institutions.

Charles Wyplosz, 07 September 2015

What have we learned from the Eurozone crisis? This column argues that, very much unfortunately, we haven’t learned that much. In desperate need of a way out of the current impasse, economists and policymakers are imagining a menu of solutions. A grand panacea seems implausible, at present. So the way to proceed should follow the time-honoured European method – ‘functionalism’. The EU and the ECB must focus on modest tasks, dealing with them one by one, if we are to find our way out of the current mess.

Giancarlo Corsetti, 07 September 2015

At the birth of the euro, the fiscal, financial, and monetary institutions in Europe were not sufficiently developed. This chapter describes these inefficiencies and the role they played in the Eurozone crisis. Instability in the Eurozone grew out of a disruptive deadlock between national governments forced to address and correct fundamental weaknesses in their national economies on their own, and the EZ-level policymaking. The future of the Eurozone therefore rests on developing an institutional framework that can credibly deliver stability at the EZ level.

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