How the euro synchronised EZ cycles

Ayako Saiki, Sunghyun Henry Kim 02 February 2014

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Prior to the introduction of the euro, the topic of whether the Eurozone fulfils the conditions for an optimum currency area was highly debated (e.g. Bayoumi and Eichengreen 1992).

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Topics:  EU institutions International finance International trade

Tags:  eurozone, euro, trade, business cycles, East Asia, supply chains, optimum currency area

The unpleasant legacy of the crisis: public debt and low trend growth in the Eurozone

Nicholas Crafts interviewed by Viv Davies,

Date Published

Tue, 01/21/2014

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See Also

Crafts, N (2013b), “Saving the Euro: a Pyrrhic Victory?”, CAGE-Chatham House Policy Briefing Paper No. 11.

Buiter, W and E Rahbari (2013), “Why Do Governments Default and Why Don’t They Default More Often?”, CEPR Discussion Paper 9492.

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Topics

Economic history Macroeconomic policy
Tags
ECB, eurozone, fiscal consolidation, public debt, gold standard, financial repression, debt monetisation

Date Weighting

-1

Related Article(s)

The Eurozone: If only it were the 1930s Escaping liquidity traps: Lessons from the UK’s 1930s escape To end the Eurozone crisis, bury the debt forever A consistent trinity for the Eurozone Why fiscal sustainability matters
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Why fiscal sustainability matters

Willem Buiter 10 January 2014

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Does fiscal sustainability matter only when there is a fiscal house on fire, as was the case with the Greek sovereign insolvency in 2011–12? Far from it.

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Topics:  Financial markets Global crisis International finance Macroeconomic policy

Tags:  eurozone, sovereign debt, capital flows, financial crisis, credit booms, fiscal policy, emerging markets, global financial crisis, banking, banks, Eurozone crisis, Currency wars, fiscal sustainability, banking union, sovereign debt restructuring, balance-sheet recession

A consistent trinity for the Eurozone

Marco Buti 08 January 2014

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While it would be premature to declare victory, owing to sustained policy efforts at all institutional levels, major progress has been made in the past two years that has put Economic and Monetary Union (EMU) on much firmer ground. All strands of economic policymaking have been working together to overhaul economic governance, to ensure the efficient transmission of monetary policy, and to create effective financial firewalls. What made this possible was the clear political determination to safeguard the integrity and future of EMU.

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Topics:  EU policies Macroeconomic policy

Tags:  eurozone, consistent trinity, Eurozone challenges

The ghost of Deauville

Ashoka Mody 07 January 2014

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The aversion to debt restructuring in the Eurozone has been remarkable, even though public debt ratios in several countries are well above the IMF-identified critical debt overhang threshold of 100% of GDP (IMF 2012). By early 2010, some recognised the urgency of restructuring Greek public debt (Calomiris 2010). But the official position between late 2009 and early 2011 deemed even Greek debt to be sustainable. Beyond the particularities of Greece, general principles were invoked. In the words of Cottarelli et al.

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Topics:  Financial markets International finance

Tags:  eurozone, sovereign debt, Eurozone crisis, sovereign debt restructuring, financial contagion, Deauville

Joint liability in international lending: A proposal for amending the Treaty of Lisbon

Kaushik Basu, Joseph Stiglitz 02 January 2014

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The sovereign debt crisis exposed weaknesses in the Eurozone’s financial architecture that may not have been fully anticipated when the founding treaties of the Eurozone were drafted. Key among these weak spots are the provisions of the Treaty of Lisbon which regulate intergovernmental debt obligations and preclude direct financing of sovereigns by the ECB.

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Topics:  EU institutions International finance

Tags:  eurozone, Maastricht Treaty, sovereign debt, moral hazard, Lisbon Treaty, Eurozone crisis, no-bailout clause

The Eurozone: If only it were the 1930s

Nicholas Crafts 13 December 2013

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The 1930s deservedly have a bad name. It is hard to imagine that a decade that included the Great Depression and a major de-globalisation of the world economy, and culminated in WWII could be other than notorious. And yet, compared with struggling Eurozone economies today, the economic situation in Europe in the later 1930s was in many ways more promising. This is particularly true of the aftermath of public debt and the difficulty of dealing with it.

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Topics:  Economic history Macroeconomic policy

Tags:  ECB, eurozone, fiscal consolidation, public debt, gold standard, financial repression, debt monetisation

Moving closer? Changing patterns of labour mobility in Europe and the US

Mai Dao, Davide Furceri, Prakash Loungani 01 December 2013

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On 21 September 1992, four famous professors – Olivier Blanchard, Rudi Dornbusch, Stan Fischer, and Paul Krugman – took part in a panel discussion at MIT on the merits of the proposed European currency union. Echoing a view common among US-based academics at the time, all four agreed, according to a record of the event, that “a common European currency would have unfavourable economic repercussions.” Blanchard noted that “currency unification works in the US because labour can move between states. The labour mobility in Europe is negligible.”

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Topics:  Labour markets

Tags:  eurozone, euro, currency union, labour mobility

The euro and price convergence: You wanted it … you got it!

Alberto Cavallo, Brent Neiman, Roberto Rigobon 29 November 2013

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Remember some of the objectives of the creation of the euro? A single currency area within Europe would carry with it:

  • Enhanced factor mobility
  • Greater productivity growth
  • Acceleration of financial development; and
  • Improved macroeconomic policies.

Or, at least, that was the hope (Wyplosz 1997).

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Topics:  Exchange rates International trade

Tags:  eurozone, euro, real exchange rates, price convergence

An early-warning indicator for debt sustainability

Casper van Ewijk, Jasper Lukkezen, Hugo Rojas-Romagosa 28 November 2013

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Insight into the sustainability of public finances is critical to European policymakers and financial markets alike. It informs decisions concerning the need for reform and the determination of the appropriate risk premium on government debt. Furthermore, unsustainable public finances may cause significant spillovers, highlighting the need for international fiscal surveillance. Recent experiences in Europe underscore how hard it is to foresee sovereign debt crises, with regard to both occurrence and depth; assessment of public finances is no easy task.

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Topics:  EU institutions Global crisis

Tags:  eurozone, sovereign debt crisis

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