Macroeconomic policy

Franziska Bremus, Marcel Fratzscher, 28 January 2015

In the aftermath of the Global Crisis, international banking is undergoing structural adjustments. This column investigates the role of policy-related drivers of changes in cross-border bank lending since the Crisis. The findings indicate that changes in regulatory policies are important push and pull factors of foreign credit. The empirical evidence further suggests that expansionary monetary policy has helped alleviate credit market fragmentation to some extent.  

Georg Ringe, Jeffrey N. Gordon, 28 January 2015

Bank resolution is a key pillar of the European Banking Union. This column argues that the current structure of large EU banks is not conducive to an effective and unbiased resolution procedure. The authors would require systemically important banks to reorganise into a ‘holding company’ structure, where the parent company holds unsecured term debt sufficient to cover losses at its operating financial subsidiaries. This would facilitate a ‘single point of entry’ resolution procedure, minimising the risk of creditor runs and destructive ring-fencing by national regulators.

Paolo Manasse, 27 January 2015

With the large Syriza victory in Greece, thoughts turn to forthcoming debt restructuring talks. This column argues that Greece is unlikely to get a large restructuring. Using a Rubinstein bargain approach to generate a back-of-the-envelope estimate, Greece would get some breathing room but not much. Rather than running a structural primary surplus of the order of 5% of potential output, as envisaged in the IMF projection, Greece could get away with a number close to 3.75%.

Paolo Manasse, 27 January 2015

This column discusses and evaluates the new guidelines issued by the European Commission regarding the Stability and Growth Pact. These do not change the existing rules, but work to improve transparency, encourage fiscal discipline, and underline that fiscal adjustments should vary based on the circumstances a country finds itself to be in. But by operating within to the existing rules, the new guidelines conform to austerity bias and complexity of implementation.

Johannes Stroebel, Joseph Vavra, 26 January 2015

Rising prices have long been a concern of monetary policymakers due to wealth effects on spending. This column presents evidence that local demand effects from  house price increases result in significant local price inflation. Households living in locations with rapidly increasing real estate prices will also face rapidly increasing costs of goods purchased in local stores.

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