A banking union for the Eurozone

Giovanni Dell'Ariccia, Rishi Goyal, Petya Koeva-Brooks, Thierry Tressel, 5 April 2013

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Before the crisis, the common currency and single market promoted financial integration. Banks and financial institutions operated with ease across countries; credit went where it was in demand; and portfolios became increasingly more diversified. The interbank market functioned smoothly, and monetary conditions were relatively uniform across the Eurozone.

Topics: EU institutions, EU policies
Tags: banking union, Eurozone crisis, regulation

The decoupling of the US and European economies: Evidence from nowcasting

Lucrezia Reichlin, Domenico Giannone, Jasper McMahon, Saverio Simonelli, 29 March 2013

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One of the most interesting features of recent business-cycle history is the decoupling of US real economic activity from that of the Eurozone (CEPR 2012, ECB 2013). CEPR's Euro Area Business Cycle Dating Committee estimates that the Eurozone entered a new recession in the third quarter of 2011, something the US has so far avoided.

Topics: Europe's nations and regions, Frontiers of economic research
Tags: decoupling, Eurozone crisis, Germany, nowcasting

The capital controls in Cyprus and the Icelandic experience

Jon Danielsson, 28 March 2013

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The Cypriot government, European authorities and the IMF have concluded that capital controls are the best way to prevent a total collapse of the Cypriot financial system. Motivated by the obvious fear that anybody with money left over in Cyprus will seek to take their money out as soon as possible, temporary capital controls are to be put in place to prevent this.

Topics: EU institutions, Macroeconomic policy
Tags: capital controls, Cyprus, Eurozone crisis, Iceland

International capital flows during crises: Gross matters

Fernando A Broner, Tatiana Didier, Aitor Erce, Sergio Schmukler, 28 March 2013

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The financial crises of the last three decades have spurred interest in the dynamics of international capital flows. Most of the work on the topic has focused on the behaviour of net capital flows, namely the difference between the foreign purchases of domestic assets (or capital inflows by foreigners) and the domestic purchases of foreign assets (or capital outflows by domestic agents).

Topics: Global crisis
Tags: Eurozone crisis, financial crisis, gross capital flows

A modern history of fiscal prudence and profligacy

Ariel Binder, Paolo Mauro, Rafael Romeu, Asad Zaman, 27 March 2013

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Considering the major impact of the global economic and financial crisis on the fiscal accounts of the main advanced economies, and their widely differing policy responses, how confident should we be that each of these countries remains fiscally prudent?

Topics: Global crisis, Macroeconomic policy
Tags: Eurozone crisis

Europe’s Cyprus blunder and its consequences

Nicolas Véron, 25 March 2013

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The late Mike Mussa1 noted that “there are three types of financial crises:

  • crises of liquidity;
  • crises of solvency; and
  • crises of stupidity.”

This quip comes to mind when considering the developments of the past ten days around Cyprus.

Topics: EU institutions, Macroeconomic policy
Tags: banking union, Cyprus, deposit guarantees, Eurozone crisis

Eurozone: Looking for growth

Laurence Boone, Céline Renucci, Ruben Segura-Cayuela, 25 March 2013

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The financial crisis that erupted in 2008, prolonged by a sovereign crisis in the Eurozone, led to a massive contraction in trade, as well as in investment in physical and human capital; thus undermining the foundations of future growth. This may well continue as growth will not rapidly rebound while deleveraging slowly proceeds across Eurozone economies.

Topics: Europe's nations and regions, Productivity and Innovation
Tags: Ageing, Eurozone crisis, growth, productivity, Solow

Cyprus is different

Marco Annunziata, 20 March 2013

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The Cyprus rescue package under discussion, with its tax on bank deposits, has raised strong emotions and triggered fiery and controversial reactions. Some economists and commentators warn that it might spark bank runs in the larger Southern European countries and ultimately result in the disintegration of the Eurozone.

Topics: EU institutions, Macroeconomic policy
Tags: Cyprus, EU, Eurozone crisis

Walking back from Cyprus

Mitu Gulati, Lee C. Buchheit , 20 March 2013

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On Friday 15 March 2013, European leaders trespassed on consecrated ground. They insisted that Cyprus impose losses – euphemistically dubbed a 'solidarity levy' – on insured depositors with Cypriot banks as a condition to receiving EZ/IMF bailout assistance. Entering Friday’s meeting, the leaders had four options on the table:

Topics: Macroeconomic policy
Tags: bailout, Cyprus, Eurozone crisis, EZ crisis

Realism, austerity or demagogy? Evidence from Italy

Maurizio Bovi, 20 March 2013

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Before it was contested, there were two interesting – but different – views about the recent political election in Italy. The Economist (2012) had defined the elections as a test of the maturity and realism of Italian voters. The advice was that Italians should vote for Monti.

Topics: Europe's nations and regions, Politics and economics
Tags: Eurozone crisis, Italy

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