Delivering the Eurozone ‘Consistent Trinity’

Marco Buti, Maria Demertzis, João Nogueira Martins, 30 March 2014



As argued in an earlier commentary, the financial crisis exposed important economic inconsistencies in the way that EMU operated.1 Although progress has been made, the reality is that more needs to be done.

Topics: Europe's nations and regions, Macroeconomic policy
Tags: banking union, debt, EMU, euro, eurozone, Eurozone crisis, fiscal consolidation, fiscal policy, imbalances, internal devaluation, Stability and Growth Pact, structural reforms

Considering QE, Mario? Buy US bonds, not Eurobonds

Jeffrey Frankel, 24 March 2014



The ECB should further ease monetary policy. Inflation at 0.8% across the Eurozone is below the target of ‘close to 2%’, and unemployment in most countries is still high. Under the current conditions, it is hard for the periphery countries to bring their costs the rest of the way back down to internationally competitive levels as they need to do.

Topics: Macroeconomic policy, Monetary policy
Tags: ECB, euro, quantitative easing

TARGET balances, Bretton Woods, and the Great Depression

Michael Bordo, 21 March 2014



During the Eurozone crisis, an analogy was made between the events in Europe between 2007 and 2012 and the collapse of the Bretton Woods System between 1968 and 1971. There has been a build-up of TARGET liabilities since 2007 by some central banks (notably Greece, Ireland, Portugal, and Spain, or the ‘GIPS’), and of TARGET assets by Germany and others.

Topics: Economic history, International finance
Tags: Bretton Woods, Central Banks, ECB, euro, Eurosystem, eurozone, Eurozone crisis, financial crisis, global imbalances, Great Depression, TARGET

A fiscal shock absorber for the Eurozone? Lessons from the economics of insurance

Daniel Gros, 19 March 2014



Even before the euro crisis started, it had been widely argued that the Eurozone needed a mechanism to help countries overcome idiosyncratic shocks. The experience of the crisis itself seemed to make this case overwhelming, and throughout the EU institutions it is now taken for granted that the Eurozone needs a system of fiscal shock absorbers.

Topics: EU institutions, Macroeconomic policy, Welfare state and social Europe
Tags: euro, eurozone, Eurozone crisis, fiscal policy, fiscal shock absorbers, fiscal shocks, fiscal union, insurance

The euro in the 'currency war'

Agnès Benassy-Quéré, Philippe Martin, 6 February 2014

CEPR Policy Insight No.69 is available to download free of charge here.

Topics: Macroeconomic policy
Tags: Currency wars, ECB monetary policy, euro

A looser monetary policy will favour a weaker euro and a stronger economy

Agnès Benassy-Quéré, Pierre-Olivier Gourinchas, Philippe Martin, Guillaume Plantin, 6 February 2014



Since July 2012, the euro appreciated more than 10% against the dollar, 6% against the pound sterling, and almost 50% against the yen (IMF 2014). Does this mean that the euro a casualty of a ‘currency war’? We believe the answer is ‘no’. The strength of the euro is the result of an overly restrictive monetary policy by the ECB.

Topics: Macroeconomic policy
Tags: Currency wars, ECB monetary policy, euro

How the euro synchronised EZ cycles

Ayako Saiki, Sunghyun Henry Kim, 2 February 2014



Prior to the introduction of the euro, the topic of whether the Eurozone fulfils the conditions for an optimum currency area was highly debated (e.g. Bayoumi and Eichengreen 1992).

Topics: EU institutions, International finance, International trade
Tags: business cycles, East Asia, euro, eurozone, optimum currency area, supply chains, trade

The latest on the dollar’s international currency status

Jeffrey Frankel, 6 December 2013



As most people know, the general trend in the dollar’s role as an international currency has been slowly downward since 1976.

Topics: International finance
Tags: dollar, euro, foreign exchange, reserve currency, yuan

Moving closer? Changing patterns of labour mobility in Europe and the US

Mai Dao, Davide Furceri, Prakash Loungani, 1 December 2013



On 21 September 1992, four famous professors – Olivier Blanchard, Rudi Dornbusch, Stan Fischer, and Paul Krugman – took part in a panel discussion at MIT on the merits of the proposed European currency union.

Topics: Labour markets
Tags: currency union, euro, eurozone, labour mobility

The euro and price convergence: You wanted it … you got it!

Alberto Cavallo, Brent Neiman, Roberto Rigobon, 29 November 2013



Remember some of the objectives of the creation of the euro? A single currency area within Europe would carry with it:

  • Enhanced factor mobility
  • Greater productivity growth
  • Acceleration of financial development; and
  • Improved macroeconomic policies.

Or, at least, that was the hope (Wyplosz 1997).

Topics: Exchange rates, International trade
Tags: euro, eurozone, price convergence, real exchange rates

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