In times of economic crisis, managers often take drastic measures to survive. This column presents new research on the preferences of managers from across Europe when faced with ‘downsizing’. It seems that, when recession bites, the instincts or ‘animal spirits’ of employers that were previously suppressed by prosperity or considered to be outdated resurface. European employers predominantly resort to offering early retirement packages (and to a lesser extent buy-outs) in response to the threat of downsizing, exacerbating, in the long run, the problems associated with Europe’s ageing population. The only notable exception to this rule is the response of Danish employers, who prefer to tackle this problem by reducing the working hours of their employees.
Hendrik P van Dalen, Kène Henkens, Wednesday, August 28, 2013 - 00:00
Dirk Schoenmaker, Sunday, August 25, 2013 - 00:00
After the financial crisis, there was a shift from international to multinational banks due to supervisors’ increasingly national approach. This column provides an alternative solution that aims to keep international banking alive. What is key is that, first, national supervisors are internationally coordinated and, second, that the whole system is supported up by an appropriate fiscal backstop.
Pierre Pâris, Charles Wyplosz, Tuesday, August 6, 2013 - 00:00
The Eurozone’s debt crisis is getting worse despite appearances to the contrary. How can we end it? This column presents five major options for reducing crisis countries’ debt. Looking into the details, it seems the only option that is both realistic and effective is for countries to default by selling monetised debt to the ECB. Moral hazard aside, burying the debt seems to be the only way we can end the crisis.
Alexander Schäfer, Isabel Schnabel, Beatrice Weder di Mauro, Friday, August 2, 2013 - 00:00
Lax financial-sector regulation was the fulcrum of the Global Crisis and policymakers reacted by introducing sweeping reforms. But has it had any impact? This column reviews evidence from bank stock returns showing that four major reforms in the US and Europe have reduced bailout expectations – especially for systemic banks. The strongest effects were found for the Dodd-Frank Act (especially the Volcker rule); the German restructuring law had little effect.
Aerdt Houben, Jan Kakes, Tuesday, July 30, 2013 - 00:00
Financial cycles have increasingly diverged across members of the Eurozone. National macroprudential tools are thus key to managing financial imbalances and protecting Europe’s economic integration. This column discusses research suggesting that reasonable macroprudential policies by the GIIPS countries in the euro’s first decade would have helped avoid much pain in Italy, Portugal and Spain. Greece’s public debt problems were far too large and its banks could not have been shielded with macroprudential policies.
Kevin Hjortshøj O’Rourke, Wednesday, July 24, 2013 - 00:00
The current economic and financial crisis has given rise to a vigorous debate about what training graduate and undergraduate economics students are receiving. This column argues that we don't teach enough economic and financial history, even though it is crucial in thinking about the economy. It also offers a wealth of opportunities for teachers who wish to motivate their students.
Harald Benink, Harry Huizinga, Friday, July 12, 2013 - 00:00
How well has OMT done? This column attempts to temper Mario Draghi’s recent plaudits that “it’s really very hard not to state that OMT has been probably the most successful monetary policy measure undertaken in recent times”. Yes, OMT should provide unlimited liquidity to troubled countries, but not at the expense of necessary structural reforms. The ECB should cover Eurozone countries’ current expenditures, but should not pay off all long-term debt holders. That way, capital markets will be disciplined and incentives for implementing economic reforms will be maintained.
Almut Balleer, Britta Gehrke, Wolfgang Lechthaler, Christian Merkl, Friday, July 12, 2013 - 00:00
During the Great Recession, 25 of 33 OECD countries have used some version of short-time work, a form of publicly subsidised working-time reductions. This column argues that despite its popularity, knowledge of the macroeconomic effects of this measure is limited. Using Germany as a case study, it’s clear that the existence of a short-time work system stabilises the economy and reduces job losses by roughly 20% during a recession. However, short-time work is a lot less effective for Anglo-Saxon labour markets.
Viral Acharya, Richard Portes, Richard Reid, Wednesday, July 3, 2013 - 00:00
Many central banks have recently employed unprecedented expansionary monetary policy, keeping interest rates at near-zero levels for an extended period of time. Quantitative easing interventions have been employed to affect asset prices directly, most notably in government-bond and mortgage markets, in order to keep sovereign and mortgage borrowing costs low. CEPR recently organised a conference to discuss existing theory and empirical evidence on the implications of an extended phase of unconventional monetary policy. This short column outlines the key issues and also includes a Vox Views video summary of the event.
Giuseppe Bertola, Friday, June 28, 2013 - 00:00
How can we make the Eurozone work, and work for everyone? This column suggests that a lack of productivity convergence and the Eurozone’s inability to deal with asymmetric shocks are both rooted in the incompleteness and incoherence of the current Eurozone policy framework. A robust and coherent European market and policy-integration process would require implementation of the behavioural constraints and redistribution schemes that operate, not without difficulties, within established national socioeconomic systems.
Livio Stracca, Tuesday, June 25, 2013 - 00:00
Should the public care about financial imbalances? This column suggests that financial imbalances are, in fact, not a main and direct concern for citizens. Of course, this does not exonerate policymakers from trying to prevent booms and busts (because they have substantial costs in terms of macroeconomic stability). Policymakers should focus on preventing the fallout of booms and busts for macroeconomic stability rather than trying to stabilise the ‘financial cycle’ as an end in itself.
Gerald A. Carlino, Robert P Inman, Monday, June 24, 2013 - 00:00
How should macro-fiscal policy be coordinated in economic unions? This column argues that the received wisdom has it right, and presents new empirical evidence suggesting that there are important positive spillovers between an economic union’s lower-tier governments in the management of macro-stabilisation policies. We should pursue coordinated policies. Finding programmes and institutions that can best facilitate this coordination is the important next step, both for new and established economic unions.
Paolo Manasse, Wednesday, June 19, 2013 - 00:00
It’s currently very trendy in Italy to blame Angela Merkel, Mario Monti, and austerity measures for the current recession. This column argues that while the severity of the downturn is clearly a cyclical phenomenon, the inability of the country to grow out of it is the legacy of more than a decade of a lack of reforms in credit, product and labour markets. This lack of reform has suffocated innovation and productivity growth, resulting in wage dynamics that are completely decoupled from labour productivity and demand conditions.
Francesco Giavazzi, Richard Portes, Beatrice Weder di Mauro, Charles Wyplosz, Wednesday, June 12, 2013 - 00:00
An ongoing German Constitutional Court case threatens to make the Eurozone Crisis much worse. This column argues that a Eurozone breakup could well be self-fulfilling given the absence of large-scale fiscal backstopping. The ECB’s Outright Monetary Transactions (OMT) programme has so far blocked speculation that could lead to such a breakup. A German court ruling against the OMT would destroy the programme’s credibility. The court would be wise to dismiss the case, if it does not want to risk becoming a threat to Eurozone stability and to taxpayers in Germany and beyond.
Charles Wyplosz, Monday, October 14, 2013 - 00:00
Exiting from unconventional monetary policies is a key challenge facing policymakers in advanced nations and a key worry for everyone else. This column introduces the new 'Geneva Report' on the subject, Exit Strategies, by Alan Blinder, Thomas Jordan, Donald Kohn and Frederic Mishkin. The report considers what the post-exit world will look like, how we can get there and the long-run impact on central banking.
Sascha O Becker, Peter Egger, Maximilian von Ehrlich, Thursday, June 6, 2013 - 00:00
The EU encourages regional cohesion through transfers for structural changes and development. This column presents new research suggesting that some poorer countries don't benefit as well as we might expect. This is likely to be because of worse technological and institutional absorptive capacity. Structural transfers need reform, and policymakers would do well to focus on recipients’ absorptive capacity.
Harald Benink, Harry Huizinga, Wednesday, June 5, 2013 - 00:00
Europe has been postponing the recapitalisation of its banking sector. This column argues that it has been doing so for far too long. Without such a recapitalisation, the danger is that economic stagnation will continue for a long period, thereby putting Europe on a course towards Japanese-style inertia and the proliferation of zombie banks.
Giancarlo Corsetti, Luca Dedola, Wednesday, June 5, 2013 - 00:00
Spain and Britain have similar debt problems. So why does Spain face far higher sovereign-interest rates? Is this because Eurozone membership makes national economies vulnerable to self-fulfilling debt crises? This column argues that EZ membership does not fully explain this discrepancy. A central bank can provide an effective backstop to national debt both in monetary unions and in countries with their own currency. EZ members are more vulnerable to debt crises to the extent that the ECB cannot count on the joint support of national fiscal authorities.
Luis Garicano, John Van Reenen, Thursday, May 30, 2013 - 00:00
France has a raft of labour-market regulations that kick in for firms with 50 workers or more. This column uses this threshold to identify the economic effects of size-contingent regulations. Such policies seem to subsidise small firms at the expense of larger firms. But since small firms are on average less productive than large firms, the French economy loses out.
Joshua Aizenman, Ilan Noy, Wednesday, May 29, 2013 - 00:00
What do macroeconomic shocks do to public and private saving? This column argues that it is only truly dramatic shocks that have a long-lasting effect on saving behaviour. Past crises tend to increase savings among households, but they also lead to decreased public-sector saving. However, the evidence suggests that this decrease in public saving is about a third of the magnitude than the corresponding increase in household saving.