Is the ECB doing QE?

Charles Wyplosz 12 September 2014

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The 4 September announcement by Chairman Mario Draghi has been greeted with enthusiasm by the markets and the media. It has been long awaited, and many believe that the ECB has finally delivered. This is not sure. The ECB intends to buy large amounts of securities backed by bank lending to households (mortgages) and to firms.

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Topics:  Exchange rates Financial markets Monetary policy

Tags:  quantitative easing, QE, monetary policy, unconventional monetary policy, ECB, securitisation, bank lending, Europe, eurozone, Subprime, stress tests, deleveraging, recapitalisation, depreciation, exchange rates, euro, central banking

To exit the Great Recession, central banks must adapt their policies and models

Marcus Miller, Lei Zhang 10 September 2014

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“Practical men…are usually the slaves…[of] some academic scribbler of a few years back” – John Maynard Keynes.

For monetary policy to be most effective, Michael Woodford emphasised the crucial importance of managing expectations. For this purpose, he advocated that central banks adopt explicit rules for setting interest rates to check inflation and recession, and went on to note that:

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Topics:  Global crisis Macroeconomic policy Monetary policy

Tags:  Taylor rule, forward guidance, great moderation, global crisis, Great Recession, quantitative easing, DSGE models, expectations, tapering, US, UK, Europe, eurozone, ECB, Bank of England, central banking, IMF, unconventional monetary policy

Is Europe saving away its future? European public funding for research in the era of fiscal consolidation

Reinhilde Veugelers 28 August 2014

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Trends in public R&I budgets in EU countries during the crisis

The dangerous cocktail in many European countries of high debt and subdued growth calls for smart fiscal consolidation. Cost-cutting programmes should minimise the potentially negative short-term effect on economic activity, while establishing a foundation for long-term growth, with growth-enhancing public expenditure safeguarded from cuts, or even increased (Teulings 2012).

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Topics:  EU policies Productivity and Innovation

Tags:  research and innovation, Europe, public spending

Secular stagnation: Facts, causes, and cures – a new Vox eBook

Coen Teulings, Richard Baldwin 10 September 2014

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Teaser from original column posted on 15 August 2014

Six years after the Crisis and the recovery is still anaemic despite years of zero interest rates. Is ‘secular stagnation’ to blame? This column introduces an eBook that gathers the views of leading economists including Summers, Krugman, Gordon, Blanchard, Koo, Eichengreen, Caballero, Glaeser, and a dozen others. It is too early to tell whether secular stagnation is really secular, but if it is, current policy tools will be obsolete. Policymakers should start thinking about potential solutions.

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Topics:  Global crisis Macroeconomic policy Monetary policy

Tags:  interest rates, US, Europe, Japan, investment, macroeconomics, Great Recession, zero lower bound, savings, secular stagnation, SecStag debate

Rethinking African solar power for Europe

Emanuele Massetti, Elena Ricci 23 July 2014

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The DESERTEC Foundation has suggested that up to 20% of power demand in Europe can be obtained by connecting African deserts to European cities (Figure 1). The idea is to build a large number of concentrated solar power (CSP) plants in Middle Eastern and Northern African (MENA) countries, and to transmit electricity to Europe by means of very efficient high-voltage direct-current cables.

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Topics:  Energy Environment

Tags:  Europe, Africa, climate change, Renewable energy, energy security, Middle East, deserts, solar, photovoltaic, wind, concentrated solar power

European banks: Between a rock (need of more capital) and a hard place (low profitability)

Marco Onado 23 February 2014

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The financial crisis has put to the forefront the long-debated issue of banks’ capital adequacy, showing that banks were much more fragile than they (and their regulators) pretended, also because they were allowed to push their leverage to levels much higher than any industrial company, or even a hedge fund, has never dreamt of.

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Topics:  Global crisis

Tags:  Europe, bank leverage, post-crisis equilibrium

Clarifying the debate about deflation concerns

Mickey Levy 21 February 2014

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A common theme among many economic policymakers, financial market participants, and the media is that rich industrialised nations face a high risk of deflation, and that deflation always harms economic performance and so must be combatted with aggressive macroeconomic stimulus. Such broad assessments are misleading, and under certain circumstances may lead to misguided policies. More clarity on the topic is required.

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Topics:  Global crisis Monetary policy

Tags:  eurozone, US, Europe, Japan, deflation, disinflation, quantitative easing

Efficient retail payments: An untapped source for reviving growth in Europe?

Iftekhar Hasan, Tuomas Takalo 24 January 2014

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Retail payments are an inherent part of most adults’ daily life in Europe. But promotion of efficient retail payments is seldom an inherent part of European growth agendas. It should be.

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Topics:  Microeconomic regulation Productivity and Innovation

Tags:  Europe, economic growth, retail, efficiency

Scrapping subsidies during the Global Crisis – Evidence from Europe

Nina Leheyda, Frank Verboven 05 December 2013

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Many governments around the world have introduced scrapping schemes during the last financial and economic crisis. In Europe, they were especially popular during the year 2009. Governments aimed to counteract the sharply declining demand for cars, while at the same time promoting cleaner cars with lower CO2 emissions. The effectiveness of the scrapping schemes for both of these objectives remains an open question. Most recent empirical work has looked at the 2009 ‘Cash for Clunkers’ programme in the US, which cost $2.85 billion and lasted for only one month. Li et al.

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Topics:  Environment

Tags:  Europe, global crisis, Cash for clunkers, scrapping subsidies

Public investments for long-term economic growth: the case of health

Michael Stolpe 22 March 2013

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Crisis or not, healthcare cries out for large-scale public investments that lock in what appears to be an historic trough in government borrowing costs in many of the world’s advanced countries.

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Topics:  Health economics

Tags:  US, Europe, Japan, investment, Ageing

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