This paper studies the mechanisms through which the adoption of the euro delayed, rather than advanced, economic reforms in the Eurozone periphery and led to the deterioration of important institutions in these countries. The authors show that the abandonment of the reform process and the institutional deterioration, in turn, not only reduced their growth prospects but also fed back into financial conditions, prolonging the credit boom and delaying the response to the bubble when the speculative nature of the cycle was already evident.

Many economists think that the US Federal Reserve’s loose monetary stance in the 2000s fuelled the US housing bubble. Is the Fed thus responsible for the Global Crisis? This column discusses evidence suggesting that monetary policy was, in fact, not to blame. Rather, it was the absence of an effective regulatory function that created the mess we’re in now. It is not fair to blame the Great Recession only on the Fed’s monetary-policy stance nor is the Fed now breeding the next US financial crisis.

How much do we really know about net capital flows? Presenting new research, this column lays out a number of new stylised facts on the dynamics of gross capital flows and their implications for policymaking. Interestingly, if we’re to learn from relatively crisis-resilient middle-income countries, policymakers may well need to monitor and perhaps regulate the separate behaviour of domestic and foreign investors to weather future crises.

What effect does trade finance have on international trade? This column uses new data to stress the importance of trade finance for international trade both in crisis and in non-crisis periods. The major policy lesson is that there must be high levels of market incentives for supplying trade credit, particularly during a period of ‘deleveraging’ of the financial system. That said, trade credit statistics could be vastly improved if we wish to continue comparing global trade finance transactions against global trade.

Why aren’t Eurozone imbalances adjusting? This column argues that there is heartening evidence that they are. Labour markets are beginning to be reformed across Europe, thereby increasing countries’ competitiveness. However, the road ahead will surely long and hard; for external adjustment to really work, it is crucial that financial markets start to take a lead supportive role.

‘Sterilisation’ - where purchases of assets by a central bank are offset by withdrawals - may help the ECB to control inflation. This column discusses how the ECB’s current approach may be fraught with danger, however. In a world where sovereign default risk is perceived to be likely, the ECB’s only real hope is that its approach makes a Eurozone default impossible.

The economic crisis has thrown the inadequacies of macroeconomics into stark relief. This column argues that the narrow conception of the macroeconomy as a system in equilibrium is problematic. Economists should abandon entrenched theories and understand the macroeconomy as self-organising. It offers detailed suggestions on what alternative ideas economists can teach their future students that better reflect empirical evidence.

Bouts of elevated uncertainty have been one of the defining features of the sluggish recovery from the global financial crisis. This column explores the role of uncertainty in driving macroeconomic outcomes using data from a large group of advanced countries over the past 40 years. It concludes that uncertainty appears to hinder growth.

This paper studies whether the involvedness of a firm’s main bank into different types of securitisation activity influences credit supply before and during the 2007-8 financial crisis. The authors find that, in general, a relationship with a bank that is more involved in securitisation activities relaxes credit constraints in normal periods. In contrast, while a relationship with a firm’s main bank that issues covered bonds reduces credit rationing during crisis periods, the issuance of asset-backed securities by a firm’s main bank aggravates these firms' credit rationing in crisis periods.

Industrialised countries today face serious risks – for their financial sectors, for their public finances, and for their growth prospects. This column explains how, through our financial systems, we have created enormous, complex financial structures that can inflict tragic consequences with failure and yet are inherently difficult to regulate and control. It explains how this has happened and why there are more and worse crises to come.