Europe's nations and regions
The long-lasting stagnation in Italy has often been explained by the country’s lost of competitiveness, but focus on total factor productivity has been scarce. This column discusses the effect of capital and labour misallocation on the productivity slowdown. Such misallocation could not result from labour rigidity, but could be due to limited ICT investment and penetration. Rigid non-meritocratic management practices can greatly affect ICT exploitation, and subsequently – overall productivity growth.
Since the advent of the Eurozone sovereign-debt crisis, economic commentators have drawn attention to macroeconomic imbalances within the Eurozone. This column presents evidence on the link between macroeconomic imbalances and differences in culture – or more specifically, interpersonal trust. A conservative estimatation suggests that a one standard-deviation increase in trust reduces macroeconomic imbalances by about a quarter of a standard deviation. Moreover, differences in interpersonal trust can explain a fifth of the variation in intra-Eurozone imbalances.
Iceland’s 2008 capital controls are still in place to prevent outflows of domestic holdings in failed cross-border banks. However, it is important for the country’s future economic prosperity to lift the capital controls without endangering financial stability. This column discusses the risks of capital controls and gives policy recommendations for cases of the three former major Icelandic banks.
In the debate over Scottish independence, the question of how the UK’s assets and sovereign debt would be divided has received insufficient attention. This column argues that the size of Scotland’s debt obligations would be crucial to its optimal choice of currency. Under plausible assumptions, fiscal tightening would be required to return Scottish debt to sustainable levels, and a self-fulfilling rise in borrowing costs might tempt Scotland to leave the sterling currency union. A debt-for-oil swap might be mutually beneficial for a newly independent Scotland and the continuing UK.
The EZ crisis increased north-south conflicts between bailout providers and recipients – especially between Germany and Greece. This column shows evidence that political conflict directly translated into losses of market share for German car producers in Greece – especially in areas where German armed forces committed massacres during World War II. Six decades later, memories of conflict are never far from the surface in Europe.
Other Recent Articles:
- Export-market exit during the crisis: Evidence from the UK
- Credit rating agencies and the Eurozone Crisis: What is the value of sovereign ratings?
- A new age of uncertainty? Measuring its effect on the UK economy
- Accounting for the ethnic unemployment gap in France and the US
- How to limit the ECB’s OMT?
- Short-time work: Does it save jobs?
- Redistribution policies at the root of the Eurozone Crisis
- When good intentions go wrong: Effects of bank deregulation and governance on risk taking
- Spillovers: Why macro-fiscal policy should be coordinated in economic unions
- The roots of the Italian stagnation
- From sovereign turmoil to private-sector woes: Italian sovereign spreads and their pass-through to bank lending conditions
- Fiscal implications of the ECB’s bond-buying programme
- EZ banking union with a sovereign virus
- The wisdom of Karlsruhe: The OMT court case should be dismissed
- Regional transfers in Europe: Do we need fewer of them or different ones?
- The urgent need to recapitalise Europe’s banks
- Is the euro a foreign currency to member states?
- Small isn’t always beautiful: The cost of French regulation
- Are Germans poorer than other Europeans? The principal Eurozone differences in wealth and income
- The banking crisis as a giant carry trade gone wrong
- A tale of two depressions: What do the new data tell us? February 2010 updateEichengreen, O’Rourke
- The ECB’s stealth bailoutSinn
- Educated in America: College graduates and high school dropoutsHeckman, LaFontaine
- Eurozone breakup would trigger the mother of all financial crisesEichengreen
- Panic-driven austerity in the Eurozone and its implicationsDe Grauwe, Ji
Adelman, 28 October 2013