The fallout from the Global Crisis and its aftermath has been deeply damaging for European output. This column uses a growth accounting framework to explore the pre-Crisis and post-Crisis growth dynamics of several European countries. The weakness of post-Crisis real GDP in the Eurozone manifested itself in a decline in employment and average hours worked. However, decomposing growth for the Eurozone as a whole conceals significant differences across European countries, in both real GDP growth and its factor inputs.
Kevin Daly, Tim Munday, Saturday, November 28, 2015 - 00:00
Régis Barnichon, Thursday, November 12, 2015 - 00:00
Many commentators have noted that the US has ridden out its post-crisis malaise rather skilfully, not least when it comes to reducing unemployment. This column argues that the US unemployment rate - despite being impressive, all things considered - still has substantial room to fall because desire to work among the non-employed is close to a record low.
Jon Danielsson, Marcela Valenzuela, Ilknur Zer, Friday, October 2, 2015 - 00:00
Does low volatility in financial markets mean that another financial crisis is more likely? And should we be worried when everything is OK? This column presents the first empirical results that find a strong validation of Minsky's hypothesis – obtained from 200 years of historical cross-sectional data – that low volatility increases the likelihood of a future financial crisis by increasing risk-taking.
Guido Tabellini, Monday, September 7, 2015 - 00:00
What are the main lessons to be drawn from the European financial crisis? This column argues that the Eurozone really is at a major cross-roads. Without a common fiscal policy, and without adequate institutions for aggregate demand management, European leaders have to constantly alter the rules. Currency risk will be the major concern of financial markets, much more than in the past, due to how Europe has dealt with the Greek crisis.
Sven Langedijk, Gaëtan Nicodème, Andrea Pagano, Alessandro Rossi, Saturday, July 4, 2015 - 00:00
Strengthening the banking sector through higher equity capital is one of the key elements of policies aiming to reduce the probability of crises. However, the ‘corporate debt bias’ – the tendency of corporate tax systems to favour debt over equity – is at odds with this objective. This column estimates the benefits for financial stability of eliminating the corporate debt bias. Fully removing the debt bias is estimated to reduce potential public finance losses by between 25 and 55% for the six large EU countries sampled.
Peter Koudijs, Hans-Joachim Voth, Saturday, April 12, 2014 - 00:00
Human behaviour in times of financial crises is difficult to understand, but critical to policymaking. This column discusses new evidence showing that personal experience in financial markets can dramatically change risk tolerance. A cleanly identified historical episode demonstrates that even without losses, negative shocks not only modify risk appetite, but can also create ‘leverage cycles’. These, in turn, have the potential to make markets extremely fragile. Remarkably, those who witnessed this episode but were not directly threatened by it, did not change their own behaviour. Thus, personal experience can be a powerful determinant of investors’ actions and can eventually affect aggregate instability.
Volker Wieland, Christos Koulovatianos, Tuesday, November 1, 2011 - 00:00
A stock-market collapse such as the one after the 2008 Lehman Brothers default is followed by more pessimistic assessments of the likelihood of future collapses in surveys and by lower price-dividend ratios. This column argues this reaction of expectations and asset prices can be explained by Bayesian decision theory. The key is to appreciate that market participants know little about the drivers of such crashes. They revise their beliefs and learn over time.
Andrew K Rose, Tomasz Wieladek, Monday, May 23, 2011 - 00:00
To what extent has financial nationalism changed banks' lending behaviour in the aftermath of the global crisis? The authors of CEPR DP8404 find much evidence that financial protectionism has morphed the lending practices of foreign banks in Britain since 2008. But--unexpectedly--they also find that British banks nationalised during the crisis changed their lending practices in no substantive way.
Carmen M Reinhart, Kenneth Rogoff, Monday, March 28, 2011 - 00:00
With public debt in the US higher than it's been since 1945 and private debt burgeoning, governments are panicking about the impact of debt overhang on growth. In CEPR DP8310, Reinhart and Rogoff argue that governments have increasingly resorted to undercover restructuring by using the tools of "financial repression" that characterized the Bretton Woods era. If states continue to ignore or distort their debt problems, the authors predict, their bond markets could become ever more repressed.
Simon J Evenett, Thursday, February 18, 2010 - 00:00
The latest GTA report examines whether macroeconomic stabilisation has altered governments' resort to protectionism, with a focus on the Gulf Region.
Charles Wyplosz, Monday, December 14, 2009 - 00:00
Greece’s public debt is in turmoil. This column says that the country is nowhere near defaulting, but the Greek government should heed the financial markets’ warning and end three decades of fiscal profligacy. It suggests that Greece adopt immediate deep spending cuts and reform its budgetary process to credibly enforce discipline.
Jean-Pierre Chauffour, Thomas Farole, Saturday, September 5, 2009 - 00:00
In April, G20 leaders agreed to massively support trade finance. Should international trade finance be a significant concern in current circumstances? This column cautions against overestimating the trade finance “gap”, yet highlights the possible rationales and conditions for an effective intervention in support of trade finance.
Guillermo Calvo, Monday, August 31, 2009 - 00:00
This column introduces "triple time-inconsistent" episodes. First, a public institution is expected to cave in and offer a bailout to prevent a crisis. Then, in an attempt to regain credibility, it pulls back. Finally, it resumes bailing out the survivors of the wreckage caused by the policy surprise. This column characterises the 1998 Russian crisis and the current crisis as triple time-inconsistency episodes and says that a financial crisis may simply be a bad time to try to build credibility.
Guillermo Calvo, Rudy Loo-Kung, Monday, June 29, 2009 - 00:00
The financial sector is prone to crises, which are typically associated with serious effects on output and employment. This column weighs the costs and benefits of financial deregulation that spurs temporarily high growth that then collapse and suggests that bubbles may be socially efficient.
Wei Liu, Yann Duval, Friday, June 19, 2009 - 00:00
The current crisis has drawn attention to the important role of trade finance in supporting international trade. This column argues that emerging market economies in Asia need to significantly develop and strengthen national trade finance institutions.
Francesco Daveri , Friday, June 5, 2009 - 00:00
The post-crisis data indicate that Italy is faring worse than the rest of Europe, except Germany. Moreover, the Italian economy entered a period of hardships and disappointing growth well before the mortgage crisis developed. This column argues that Italy cannot afford to postpone reforms if it wants to resume faster long-run growth.
Kimberly A. Elliott, Wednesday, May 27, 2009 - 00:00
The economic crisis is hitting the world’s poorest countries through falling trade and commodity prices. This column argues that the US should respond by further opening its market to exports from small, poor economies. That would not only provide an additional stimulus to those economies but also strengthen US global leadership, give a boost to the Doha Round, and serve broader US national interests by helping to promote political stability in some very shaky parts of the world.
Viral Acharya, Hyun Song Shin, Irvind Gujral, Tuesday, March 31, 2009 - 00:00
Banks’ corporate governance is under fire. Perhaps one of the worst failures of governance has been the continued payment of dividends throughout the financial crisis. This column says that dividends’ erosion of common equity deprived banks of capital when they most needed it. It proposes cutting dividends as the first step in the resolution of future banking crises.
Mike Elsby, Bart Hobijn, Aysegul Sahin, Saturday, February 14, 2009 - 00:00
Unemployment is rising – job losses are up 30% in the US and 50% in the UK since 2007. How bad will it get? This column uses data on unemployment inflows and duration to predict labour market trends. A conservative estimate says that unemployment will reach at least 5% in Britain and 13.5% in Spain.
Xavier Vives, Tuesday, May 13, 2008 - 00:00
Information is at the heart of the recent liquidity crisis: Who bears risks? Who has losses? Who is insolvent? This column, which draws on the author’s recently published book, 'Information and Learning in Markets', explains why solving the crisis requires closing such information gaps.