The EZ Crisis is a long way from finished. The latest VoxEU eBook presents a consensus view of what caused the Crisis and why. It argues that this was a classic ‘sudden stop’ crisis – not a public-debt crisis. Excessive, cross-border lending and borrowing among EZ members in the pre-Crisis years – much of which ended up in non-traded sectors – was why Greece’s deficit deceit in 2009 could trigger such a massive crisis. The ultimate causes were policy failures that allowed the imbalances to get so large, a lack of institutions to absorb shocks at the EZ level, and poor crisis management.
Richard Baldwin, Francesco Giavazzi, Monday, September 7, 2015 - 00:00
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.
Sebastian Edwards, Wednesday, March 4, 2015 - 00:00
Lars P Feld, Christoph M Schmidt, Isabel Schnabel, Benjamin Weigert, Volker Wieland, Friday, February 20, 2015 - 00:00
Hans Holter, Dirk Krueger, Serhiy Stepanchuk, Friday, February 20, 2015 - 00:00
Julio Escolano, Laura Jaramillo, Carlos Mulas-Granados, Gilbert Terrier, Friday, February 27, 2015 - 00:00
Jean-Pierre Landau, Tuesday, December 2, 2014 - 00:00
Jagjit Chadha, Sunday, November 2, 2014 - 00:00
Biagio Bossone, Thomas Fazi, Richard Wood, Wednesday, October 1, 2014 - 00:00
Francesco Giavazzi, Guido Tabellini, Thursday, August 21, 2014 - 00:00
The stagnating Eurozone economy requires policy action. This column argues that EZ leaders should agree a coordinated 5% tax cut, extension of budget deficit targets by 3 or 4 years, and issuance of long-term public debt to be purchased by the ECB without sterilisation.
Ricardo Reis, Jens Hilscher, Alon Raviv, Thursday, August 7, 2014 - 00:00
Faced with daunting levels of public debt, it may be tempting to inflate away the burden. Some recent research has endorsed such a policy, but this column argues that it is infeasible. The rule of thumb that suggests an inflation rate four percentage points higher would reduce debt by 20% ignores creditor composition and maturity details, even if a 6% inflation rate were achievable. The hard truth is that there is no easy way out of debt.
Fernando A Broner, Aitor Erce, Alberto Martin, Jaume Ventura, Wednesday, July 23, 2014 - 00:00
Since 2010, Eurozone periphery countries have faced severe debt problems and falling credit to the private sector. This column interprets these events with a theory that has three main ingredients. First governments can favour domestic creditors. Second, public debt trades in secondary markets so debt holdings shift from foreign to domestic residents. Third, due to private financial frictions, this shift crowds out private investment and growth.
Matthijs Lof, Tuomas Malinen, Sunday, May 25, 2014 - 00:00
Public debt and economic growth are historically negatively correlated. This column discusses new evidence that rejects the debt-to-growth causality. After estimating the effects between debt and growth in both directions, there is no evidence that high indebtedness suppresses economic growth. The effect of growth on debt is the main driver of the negative correlation.
Nicholas Crafts, Tuesday, January 21, 2014 - 00:00
Nicholas Crafts talks to Viv Davies about his recent work on the threatening issue of public debt in the Eurozone. Crafts maintains that the implicit fault line in the EZ is evident; several EZ economies face a long period of fiscal consolidation and low growth and that a different sort of central bank might be preferable. They also discuss the challenges and constraints of banking, fiscal and federal union. The interview was recorded in London on 17 January 2014.
Nicholas Crafts, Friday, December 13, 2013 - 00:00
This column argues that the legacy of public debt resulting from the crisis in the Eurozone is a serious threat. Both the size of the problem and the options to address it make life much more difficult for policymakers than was the case in the late 1930s after the collapse of the gold standard. For some countries, a ‘subservient’ central bank might be preferable to the ECB.
Richard Wood, Friday, August 31, 2012 - 00:00
Quantitative easing and austerity have done little to stop the EZ's periphery economies sliding towards depression. Policy Insight No. 62 argues that new money creation can finance deficits without increasing public debt.
Peter Stella, Manmohan Singh, Monday, May 14, 2012 - 00:00
Much of the debate over public finances in the US relates to the amount of debt, this column explores the type of debt. It criticises the recent suggestion that the US Treasury should start issuing floating rate notes.
Pontus Rendahl, Thursday, April 26, 2012 - 00:00
Many developed economies are in a liquidity trap with interest rates at or near zero. Many also have high unemployment that looks set to persist. This column argues that it is times like these when governments should be spending more, not less – they just have to be careful how they do it.
S. M. Ali Abbas, Nazim Belhocine, Asmaa El-Ganainy, Mark Horton, Sunday, December 18, 2011 - 00:00
As policymakers continue to grapple with high debts and the troubles that come with them, this column looks at the lessons from data on public debt in 178 countries stretching back as far as 1880. It argues that when faced with an unsustainable debt burden, slow but steady adjustment is the way to go.
Maurizio Bovi, Friday, December 2, 2011 - 00:00
The countries most affected by the Eurozone debt crisis seem also to be characterised by bad institutions and large shadow economies. This column describes the bad equilibrium in which bad governments offer few and low-quality public services and make people less willing to pay for services. Firms stay underground, public receipts stay low, and governments remain inefficient. In sum, the presence of inept bureaucracy may be strongly associated with the shadow economy.