Philip R. Lane, Monday, September 7, 2015 - 00:00

In the lead up to the global financial crisis, there was a substantial credit boom in advanced economies. In the Eurozone, cross-border flows played an especially important role in the boom-bust cycle. This column examines how the common currency and linkages between member states contributed to the Eurozone crisis. A very strong relationship between pre-crisis levels of external imbalances and macroeconomic performance since 2008 is observed. The findings point to the importance of delinking banks and sovereigns, and the need for macro-financial policies that manage the risks associated with excessive international debt flows.

Alex Pienkowski, Pablo Anaya, Thursday, August 6, 2015 - 00:00

During the Global Crisis, sovereign debt-to-GDP ratios grew substantially in the face of shocks to growth, increased fiscal deficits, bank recapitalisation costs, and rising borrowing costs. This column looks at how these various shocks interact with each other to exacerbate or mitigate the eventual impact on debt. Choice of monetary policy regime is an important determinant of how public debt reacts to these shocks.

Esa Jokivuolle, Jussi Keppo, Xuchuan Yuan, Thursday, July 23, 2015 - 00:00

Bankers’ compensation has been indicted as a contributing factor to the Global Crisis. The EU and the US have responded in different ways – the former legislated bonus caps, while the latter implemented bonus deferrals. This column examines the effectiveness of these measures, using US data from just before the Crisis. Caps are found to be more effective in reducing the risk-taking by bank CEOs.

Joshua Aizenman, Yin-Wong Cheung , Hiro Ito, Saturday, September 13, 2014 - 00:00

Barry Eichengreen, Andrew K Rose, Thursday, June 5, 2014 - 00:00

Since the global financial crisis of 2008–2009, opposition to the use of capital controls has weakened, and some economists have advocated their use as a macroprudential policy instrument. This column shows that capital controls have rarely been used in this way in the past. Rather than moving with short-term macroeconomic variables, capital controls have tended to vary with financial, political, and institutional development. This may be because governments have other macroeconomic policy instruments at their disposal, or because suddenly imposing capital controls would send a bad signal.

Erik Feyen, Raquel Letelier, Inessa Love, Samuel Munzele Maimbo, Roberto Rocha, Saturday, March 15, 2014 - 00:00

Eastern Europe was hit especially hard by the credit crunch during the global financial crisis. This column presents new evidence suggesting that reliance on foreign funding was more important than foreign bank ownership per se in exacerbating the post-crisis credit contraction. These findings point to the need to put more emphasis on the discussion of bank business models, regulatory standards, and supervisory arrangements.

Giulia Bettin, Andrea F Presbitero, Nikola Spatafora, Monday, February 10, 2014 - 00:00

Remittances are one of the most important financial flows to developing countries – more than three times the level of official development assistance. This column presents recent research on remittance flows from Italy. Their limited volatility and countercyclical behaviour with respect to macroeconomic conditions in the recipient country help mitigate developing countries’ vulnerability to external shocks. Better access to financial services for migrants can foster remittance flows.

Jose Luis Diaz Sanchez, Aristomene Varoudakis, Thursday, February 6, 2014 - 00:00

External imbalances within the Eurozone grew substantially between the introduction of the euro in 1999 and the global financial crisis of 2008–09. Using new empirical evidence, this column argues that imbalances in the Eurozone periphery were mainly driven by a domestic demand boom, triggered by greater financial integration, with changes in the periphery’s competitiveness playing only a minor role. Internal devaluation may thus have been of limited effectiveness in restoring external balances, although better external competitiveness may eventually boost medium-term growth.

Kristin Forbes, Wednesday, February 5, 2014 - 00:00

The Federal Reserve’s ‘taper talk’ in spring 2013 has been blamed for outflows of capital from emerging markets. This column argues that global growth prospects and uncertainty are more important drivers of emerging-market capital flows than US monetary policy. Although crises can affect very different countries simultaneously, over time investors begin to discriminate between countries according to their fundamentals. Domestic investors play an increasingly important – and potentially stabilising – role. During a financial crisis, ‘retrenchment’ by domestic investors can offset foreign investors’ withdrawals of capital.

Eiji Ogawa, Zhiqian Wang, Sunday, January 19, 2014 - 00:00

Since the East Asian financial crisis of 1997, the emphasis on regional monetary cooperation has grown. This column discusses recent research into intra-regional exchange rate misalignments. In the aftermath of the Global Financial Crisis, investors in the US and Europe withdrew from emerging markets, causing a depreciation of emerging-market currencies against the US dollar. At the same time, the appreciation of the Japanese yen – fuelled in part by intra-regional capital flows – has increased the misalignment of intra-regional exchange rates.

Willem Buiter, Friday, January 10, 2014 - 00:00

Fiscal sustainability has become a hot topic as a result of the European sovereign debt crisis, but it matters in normal times, too. This column argues that financial sector reforms are essential to ensure fiscal sustainability in the future. Although emerging market reforms undertaken in the aftermath of the financial crises of the 1990s were beneficial, complacency is not warranted. In the US, political gridlock must be overcome to reform entitlements and the tax system. In the Eurozone, creating a sovereign debt restructuring mechanism should be a priority.

Sebnem Kalemli-Ozcan, Tuesday, January 7, 2014 - 00:00

Financial crises are generally preceded by credit booms and a build-up of external debts. Although it is unclear whether Turkey is experiencing a financial bubble, as of 2013, 58% of the corporate sector’s debt was denominated in foreign currencies. This column argues that this explains the Central Bank of Turkey’s interventions to prop up the value of the Turkish lira. Given the relatively low level of reserves and the unfolding corruption scandal, it is a critical question how long the Bank can continue to do so.

Kristin Forbes, Michael W Klein, Tuesday, December 24, 2013 - 00:00

Government interventions to control capital flows and reduce exchange-rate volatility have long been controversial. The Global Financial Crisis has made the debate more urgent. This column discusses recent research that evaluates such policies against the counterfactual of no intervention. Depreciations and reserve sales can boost GDP growth during crises, but may also substantially increase inflation. Large increases in interest rates and new capital controls are associated with reductions in GDP growth, with no significant effect on inflation. When faced with sudden shifts in capital flows, policymakers must ‘pick their poison’.

Donato Masciandaro, Francesco Passarelli, Saturday, December 21, 2013 - 00:00

During the Great Moderation, central banks focused on price stability, and independence was seen as crucial to limit inflation bias. Since the Global Financial Crisis, emergency support measures for banks, and central banks’ increasing involvement in supervision, have called central bank independence into question. This column argues that the literature has overlooked the distributional effects of the tradeoff between monetary and financial stability. In a political economy framework, heterogeneity in voters’ portfolios can cause the degree of central bank independence to differ from the social optimum.

Yacine Aït-Sahalia, Jochen Andritzky, Andreas Jobst , Sylwia Nowak, Natalia Tamirisa, Thursday, December 10, 2009 - 00:00

Market distress has eased since the height of the crisis, suggesting that some government policies have been successful. But which ones? This column argues markets are calmed by policies that form part of a strategy; ad-hoc policies add to market fears.

Avinash Persaud, Friday, October 30, 2009 - 00:00

Avinash Persaud, chairman of Intelligence Capital, talks to Romesh Vaitilingam about financial regulation after the crisis, including whether it is feasible and desirable to introduce a ‘Tobin tax’ on financial transactions. The interview was recorded at the Global Economic Symposium in Schleswig-Holstein in September 2009.

Jeffry A. Frieden, Friday, October 16, 2009 - 00:00

Jeffry Frieden, professor of government at Harvard University, talks to Romesh Vaitilingam about global economic governance – including the world trading system, financial regulation and the G-20 – and their interactions with domestic politics, particularly in the United States. The interview was recorded at the Global Economic Symposium in Schleswig-Holstein in September 2009.

Carmen M Reinhart, Andrew Felton, Wednesday, July 2, 2008 - 00:00

This collection brings together the best columns on the subprime crisis as well as providing a timeline of the crisis and a glossary. The columns – by luminaries such as Boeri, Buiter, Cecchetti, De Grauwe, Guiso, Persaud, Spaventa, Tabellini, Wyplosz and many more – are grouped into 3 headings: Why did the crisis happen? How is the crisis unfolding? And What can be done?

Erik Berglöf, Monday, October 5, 2009 - 00:00

Europe’s banking system did not collapse, and the twin-crisis curse – calamity in both banking and currencies – did not appear, but this is no time for resting on laurels. The ERBD’s Chief Economist argues that Europe’s “muddle-through cooperation” on financial institutions (Vienna Initiative) needs continued political support as do reforms of long-run fiscal positions and financial regulation.

The Editors, Friday, July 17, 2009 - 00:00

The latest CEPR/ICMB Geneva Report on the World Economy examines two key challenges facing central banks in the aftermath of the financial crisis: removing the current substantial fiscal stimulus; and enhancing their monetary policy frameworks.


CEPR Policy Research