The perils of a strong US dollar
Edward Luce (FT) Feb 1, 2015
The bad news is the US recovery is based on the familiar model of rising consumption.
Capitalism has broken free of democracy
Slavoj Zizek (FT) Feb 1, 2015
Economic models have proved more portable than political ideas.
Markets can get too much information
Philip Augar (FT) Feb 1, 2015
Management quality not quarterly reporting requirements drives value-creating behaviour.
UK must hold Russian elite to account
Anne Applebaum (FT) Feb 1, 2015
Litvinenko’s murder has been treated as a spy story — but it is terrorism.
A Smarter Way to Tax Big Banks
Mark Roe and Michael Troge (WSJ) Feb 1, 2015
Make the cost of equity tax-deductible in the same way that the cost of debt is deductible.
Putin’s Ruble Gamble
WSJ Feb 1, 2015
The Kremlin cuts rates despite currency and inflation risks.
The IMF's lament for Ireland
Frances Coppola (Pieria) Feb 1, 2015
The sad story of Ireland in the Eurozone, as told by the IMF.
Currency War Claims Another Casualty: Denmark
Mark Gilbert (Bloomberg View) Feb 1, 2015
Denmark is the latest casualty in the currency wars. I've seen this movie before; it never ends well.
An Unconventional Truth
Nouriel Roubini (Project Syndicate) Feb 1, 2015
To be effective, monetary stimulus must be accompanied by temporary fiscal stimulus, which is now lacking in all major economies. That is why, given persistent insufficient aggregate demand, unconventional monetary policies will remain a central feature of the macroeconomic landscape.
China's global influence won't be determined by the size of its economy
Alexander van Kemenade (SCMP) Feb 2, 2015
History shows that advantages in finance and technology matter more.
Greece Advances a Good Idea: Indexing Its Debt Repayments to Economic Growth
Paolo Mauro (PIIE) Feb 2, 2015
In renegotiating its aid package with the newly elected government of Greece, European governments and institutions should stand firm on demanding fiscal sustainability and reforms. But that does not mean they should reject good ideas put forward by Athens.
Dangerous cracks at Europe’s centre
Gideon Rachman (FT) Feb 2, 2015
Comparisons are being made with the economic depression and unstable politics of the 1930s.
Weaker trade is EM’s demon in disguise
Bhanu Baweja (FT) Feb 2, 2015
Link between global growth and global trade seems to be loosening.
Greece Plays Colonel Blotto With Europe
Justin Fox (Bloomberg View) Feb 2, 2015
How "Colonel Blotto" and other ideas from game theory explain the country's new approach.
January’s Market Volatility: Blip or Omen?
Mohamed A. El-Erian (Bloomberg View) Feb 2, 2015
For the rough ride, investors can blame the large and persistent deviations among systemically important countries when it comes to economic performance and monetary policy prospects.
Europe Should Call Greece's Bluff
Guy Hands (Bloomberg View) Feb 2, 2015
Giving in to Athens's demands would create a Greek tragedy likely to engulf all of Europe.
Maintaining Growth in India
Raghuram Rajan (Project Syndicate) Feb 2, 2015
Global economic stagnation is no reason for India to lower its ambitions, though maintaining the growth it needs will require the country to rethink its economic approach. That means looking to regional and domestic demand, strengthening the country's macroeconomic institutions, and taking up the fight for an open global system.
What Is Plan B for Greece?
Kenneth Rogoff (Project Syndicate) Feb 2, 2015
Though the far-left Syriza party’s recent election victory has sent Greek equities and bonds plummeting, there is little sign of contagion to other distressed countries on the eurozone periphery. The question is how long this relative calm will prevail.
Cancer Care for the Developing World
Lawrence N. Shulman (Project Syndicate) Feb 2, 2015
Over the last 40 years, steady progress has been made in the use of chemotherapy, surgery, and radiation to treat and cure cancer patients. But access to these life-saving advances remains elusive in low- and middle-income countries, where the majority of cancer patients reside today.
Renaissance in American Manufacturing? Not So Fast
Robert D. Atkinson (Globalist) Feb 2, 2015
Optimistic statistics on American manufacturing distract from the less optimistic truth.
Groundhog Day in Greece
Thorsten Beck (VoxEU) Feb 2, 2015
The Greek-Troika conflict is roiling markets, boardrooms and cabinet offices around the world. Crises are best solved by recognising losses, allocating them and moving on, so the biggest risk, this column argues, is that a compromise kicks the can further down the road. As the can rolls on, the scenery becomes politically and socially less attractive – fuelling the rise of political animosities, nationalism, and fringe parties. Greece is a special case but indicative of the core problem – deficient EZ governance structures that mean societies are stuck with increasing socioeconomic exclusion and political despair. The crisis will continue until the necessary further deepening of EZ institutional structures is completed.
Real effects of credit rating downgrades
Philippe Karam, Ouarda Merrouche, Moez Souissi and Rima Turk (VoxEU) Feb 2, 2015
In the wake of the Crisis, policymakers have introduced liquidity regulation to promote the resilience of banks and lower the social cost of crisis management. This column shows that a funding liquidity shock, manifested as lower access to wholesale sources of funding following a credit rating downgrade, translates into a significant decline in both domestic and foreign lending. Liquidity self-insurance by banks mitigates the impact of a credit rating downgrade on lending.
The New Asian Order
Evan A. Feigenbaum (FA) Feb 2, 2015
And how the United States fits in.
A deal to bring modernity to Greece
Martin Wolf (FT) Feb 3, 2015
The EU is supposed to be a union of democracies, not an empire. It should negotiate in good faith.
Fears over EU-US trade deal well grounded
John Kay (FT) Feb 3, 2015
In the past decade large, mostly American, companies have claimed rights under ISDS.
China finds opportunities in cheap oil
Henny Sender (FT) Feb 3, 2015
Taxes rise along with storage capacity to reduce vulnerability to price swings in volatile energy market.
Greece deserves a ‘new deal’
Katrina vanden Heuvel (WP) Feb 3, 2015
The time has come for Europe to move beyond crippling austerity measures in.
Greece Needs Growth, But How?
Holger Schmieding (Globalist) Feb 3, 2015
Austerity was already over when Syriza got elected. Will the new government pursue real reforms to get the country growing?
Economic Interests Attract China to Russia, Not Edgy Policies
Wang Yiwei (YaleGlobal) Feb 3, 2015
China pursues a non-alliance policy, in no way obliged to follow Russia on confrontation with the West.
Switzerland Rejoins Currency Wars
Mark Gilbert (Bloomberg View) Feb 3, 2015
Two weeks after Switzerland stunned currency traders by abandoning the franc's peg to the euro, the central bank is quietly back in the market.
Greece's Debt Plan Is a Hidden Haircut
Leonid Bershidsky (Bloomberg View) Feb 3, 2015
The Greek government's proposal calls on the ECB to write off 27 billion euros in debt.
Man Wants Bonds to Be More Complicated
Matt Levine (Bloomberg View) Feb 3, 2015
A lot of financial magic is just, put a thing in a box, put another thing in the same box, sell bits of the box.
Investing in Immigrant Europe
Giles Merritt (Project Syndicate) Feb 3, 2015
The attacks in Paris last month unleashed a welter of opinion about how to prevent further violence – whether by jihadist terrorists or against Muslim communities. But the focus of that debate risks eclipsing the much wider question of whether Europe has sown the seeds of disaffection through neglect of its immigrants.
A Greek Morality Tale
Joseph E. Stiglitz (Project Syndicate) Feb 3, 2015
When the euro crisis began a half-decade ago, Keynesian economists predicted that the austerity imposed on Greece and the other crisis countries would fail. Now that it has, what is needed is not structural reform in Greece so much as a fundamental reform of the eurozone's design and policy frameworks.
The Fog of Disorder
Wolfgang Ischinger and Adrian Oroz (Project Syndicate) Feb 3, 2015
As the international order becomes harder to manage, traditional and potential leaders increasingly consider the challenge too great, further fueling unpredictability and instability. It was at this intersection of test and trepidation that today’s vicious circle of geopolitical turmoil was set in motion.
Big oil is not the biggest victim of cheap crude
John Gasper (FT) Feb 4, 2015
Countries not companies are paying the price for the industry’s crisis.
Greece owes a debt to Spain
Andrés Ortega (FT) Feb 4, 2015
Athens brinkmanship could drive a wedge between the north and south of EU.
Corporate China not ready to take over
David Pilling (FT) Feb 4, 2015
Regulation and suspicion harm companies’ efforts to break into foreign markets.
Why S&P 500 can reach 3,000 by 2020
Dominic Rossi (FT) Feb 4, 2015
In a world of income scarcity, US shares provide dividend growth.
Greece is part of global debt challenge
Ralph Atkins (FT) Feb 4, 2015
Proposals from McKinsey may not appeal much to Germany though.
Greece’s Partial Reality Check
WSJ Feb 4, 2015
Athens needs to focus on supply-side reform before debt restructuring.
The ECB Fears Deflation, But You Should Not
Frank Shostak (Mises Daily) Feb 4, 2015
The European Central Bank (ECB) is planning to pump 1.1 trillion euros into the banking system to fend off price deflation and revive economic activity. The ECB president and his executive board are planning to spend 60 billion euros per month from March 2015 to September 2016.
Pan-African Banks Expansion Could Boost Systemic Risks
IMF Survey Feb 4, 2015
Rapid expansion of cross-border banking in Africa in recent years poses oversight challenges that, if unaddressed, may increase systemic risks, IMF staff say. A recent report adds that pan-African banks are now more important than the continent’s long-established European and American banks.
Fiscal Policy in the Era of Stagnation
Paolo Mauro (PIIE) Feb 4, 2015
A fervent debate continues to rage over the hypothesis that the United States and other countries are in the grip of "secular stagnation," and cannot expect that robust economic growth will return anytime soon. At the latest American Economic Association meetings in January, the discussion focused on policies to prevent stagnation or at least to alleviate it. A commonly cited prescription is to boost public spending in an effort to help economic growth recover.
Brazil Dries Up and Blacks Out
Mac Margolis (Bloomberg View) Feb 4, 2015
Water is to Brazilian politicians what oil is to petrocrats -- just a pipeline away, too abundant to fret over. Except when it's not.
Piketty Diagnoses Japan's Sick Economy
William Pesek (Bloomberg View) Feb 4, 2015
Abenomics may be great for corporate Japan, but the people are still waiting for any benefit. The economist Thomas Piketty has a solution.
Will the Next Recession Destroy Europe?
Clive Crook (Bloomberg View) Feb 4, 2015
If the EU can't handle Greece, how will it weather another recession?
Russian Ruble's Hapless Little Brother
Leonid Bershidsky (Bloomberg View) Feb 4, 2015
Belarus's ruble is the world's worst-performing currency because of its perpetual currency war with Russia.
Unraveling a Greek Drama
Mohamed A. El-Erian (Bloomberg View) Feb 4, 2015
Why markets should expect more turbulence from Greece.
China’s G-20 Moment
Yu Yongding and Domenico Lombardi (Project Syndicate) Feb 4, 2015
Next year, China will take a turn as host of the G-20. Chinese President Xi Jinping did not miss the opportunity to advance the goal of an Asia-Pacific trade agreement while hosting last year’s APEC summit, and he certainly will not pass up the chance to ensure that the G-20 agenda serves China’s interests.
Innovate or Stagnate
Mohammed bin Rashid Al Maktoum (Project Syndicate) Feb 4, 2015
Companies, like people, start life small and eager to survive, fueled by youthful energy and fresh ideas, before eventually fading into obscurity. The same is true of governments: They, too, can lose the hunger and ambition of youth and allow themselves to become complacent.
Two Cheers for the New Normal
Jim O'Neill (Project Syndicate) Feb 4, 2015
According to conventional wisdom, global economic conditions are bleak, with developed countries stagnating and emerging economies beginning to flounder. But, though global growth has slowed since this century's heady first years, by recent historical standards, the last four years look relatively good.
The illusion of monetary policy independence under flexible exchange rates
Sebastian Edwards (VoxEU) Feb 4, 2015
The conventional ‘trilemma’ view is that countries that allow free capital flows can still pursue independent monetary policies as long as they allow flexible exchange rates. This column examines the pass-through of Federal Reserve interest rates to policy rates in Chile, Colombia, and Mexico. The author concludes that, to the extent that central banks take into account other central banks’ policies, there will be ‘policy contagion’ and that, even under flexible rates, monetary policy will not be fully independent.
A Greek strategy to win German hearts
Robert Shrimsley (FT) Feb 5, 2015
Schäuble and Varoufakis cannot help but mention the war.
Greece is part of global debt challenge
Ralph Atkins (FT) Feb 5, 2015
Proposals from McKinsey may not appeal much to Germany.
Greece owes a debt to Spain
Andrés Ortega (FT) Feb 5, 2015
Athens brinkmanship could drive a wedge between the north and south of EU.
Greeks Get a Euro Education
WSJ Feb 5, 2015
Alexis Tsipras’s new government won’t be able to divide and conquer Europe.
Four Years After, Tunisia Remains the Arab Spring's Lone Success Story
Chris Miller (YaleGlobal) Feb 5, 2015
Tunisia succeeded where Libya, Egypt, Syria failed – with compromise, avoidance of sectarian politics, and no external meddling.
The Oil Industry’s Future
Jeremy Grantham (Barron's) Feb 5, 2015
The various forces that will drive energy prices in coming years.
TPP Talks See Progress in New York as Officials Suggest Deal Within Months
Bridges, Volume 19, Number 4 Feb 5, 2015
Efforts to wrap up the 12-country Trans-Pacific Partnership (TPP) talks have reportedly gained momentum in recent weeks, with officials suggesting that a deal may be possible within months. Chief negotiators meeting in New York last week aimed to bridge some of the gaps across several chapters, amid reports that a breakthrough on US-Japan agriculture and automobile talks could be imminent.
Doha Round: Farm Exporters Question US Subsidies as Trade Talks Resume
Bridges, Volume 19, Number 4 Feb 5, 2015
US farm subsidies could exceed proposed new WTO limits by as much as US$3.6 billion, a new paper from a dozen agricultural exporting countries has said. The paper is the first attempt this year to move negotiators towards a more specific discussion of what they see as desirable and feasible under a possible Doha Round deal on trade.
African Leaders Stress Infrastructure Development Needs to Boost Growth
Bridges, Volume 19, Number 4 Feb 5, 2015
Enhancing infrastructure can promote industrialisation and boost intra-African trade, serving as a boon to the continent's growth, said South African President Jacob Zuma at the New Partnership for Africa's Development (NEPAD) Heads of State and Government Summit held in Addis Ababa, Ethiopia ahead of the AU Summit last week.
All We Are Saying Is Give Greece a Chance
Bloomberg View Feb 5, 2015
Greece has blinked; the EU should respond with a conciliatory approach.
Europe’s Two Futures
Dominique Moisi (Project Syndicate) Feb 5, 2015
Once again, Europe seems to have reached a fork in the road, either about to slide into oblivion or to demonstrate its ability to weather the strongest storms. The future will ultimately be determined by Europeans themselves, but they would be wise to consider how they are viewed from abroad.
Europe’s Eurasian Opportunity
Michael Schaefer and Inna Veleva (Project Syndicate) Feb 5, 2015
Europe's energy policy is being shaped by short-term geopolitical considerations, to the detriment of long-term stability and security. It is time for a new approach that leverages the interconnectedness of energy systems, economies, and strategic relationships to build a peaceful and prosperous future.
Obama Joins the Greek Chorus
Ashoka Mody (Project Syndicate) Feb 5, 2015
President Barack Obama’s recent call to ease the austerity imposed on Greece is remarkable – and not only for his endorsement of the newly elected Greek government’s stance in the face of its creditors. His comments represent a break with the long-standing tradition of American silence on European monetary affairs, and they should be heeded.
Is Russia Planning a Gold-Based Currency?
Marcia Christoff-Kurapovna (Mises Daily) Feb 6, 2015
The “perfect-storm” of geopolitical instability, diplomatic isolation, severe currency depreciation, and economic decline now confronting Russia has profoundly damaged Moscow's international standing, and possibly for the long-term. Yet, it is precisely such conditions that may push the country’s leadership into taking the radical step that will secure its world-player status once and for all: the adoption of a gold-exchange standard.
Globalisation everywhere but in the growth numbers
Michael Huberman, Christopher M. Meissner and Kim Oosterlinck (VoxEU) Feb 6, 2015
Understanding the relationship between trade and growth is still at the core of the economics profession. This column seeks to identify the pathways by which globalisation affects economic growth looking at the case of Belgium in the decades preceding the First World War. It argues that the collapse in fixed export costs promoted the entry of uncompetitive firms into export markets and as the trade component of GDP rose, the share of high performing firms contracted, slowing growth.
Four Fallacies About the Greek Crisis
Martin Hüfner (Globalist) Feb 6, 2015
Four incorrect assumptions veil the truth about Greece’s economic situation.
The Rise of the Frugal Economy
Navi Radjou and aideep Prabhu (Project Syndicate) Feb 6, 2015
Western economies have long been organized like pyramids, with a few large producers at the top and millions of passive consumers below. But with the Internet all but eliminating the costs associated with search, bargaining, decision-making, and enforcement, this economic structure is changing fast.
Are Oil Price Declines Good for the Economy?
Kevin L. Kliesen (FRBSL Economic Synopses) Feb 6, 2015
As expected, falling crude oil prices lead to falling gasoline prices and lower inflation.
Anxiety and Interest Rates: How Uncertainty Is Weighing on Us
Robert J. Shiller (NYT) Feb 7, 2015
People’s uncertainties about their personal futures are affecting our economic world in ways we don’t entirely understand.
Global growth report card: Eurozone and Japan recovering
Gavyn Davies (FT) Feb 8, 2015
A pick-up in activity in both the Eurozone and Japan is countering, and perhaps more than offsetting, a slowdown in the US. But in China, the progressive and gradual slowdown continues.
Crises and trust
Maxim Ananyev and Sergei Guriev (VoxEU) Feb 8, 2015
The negative effects of recessions are not limited to consumption. Among others, they could also be harmful to preferences and values. This column uses recent evidence from Russia to argue that recessions can result in a sizeable decrease in interpersonal trust. This effect is transient in places where the fall in trust is small. In these regions, trust snaps back to pre-crisis levels as GDP recovers. In the places where fall in trust is large, the effect is persistent. Even after a recovery, trust remains 10 percentage points below the pre-crisis level.
The Case for Aid to Central America
NYT Feb 9, 2015
If the Obama administration's billion-dollar funding level is approved, it stands a much better chance of addressing the region's instability.
Nobody Understands Debt
Paul Krugman (NYT) Feb 9, 2015
Families who rely on it make themselves poorer, so isn't that true of nations? No, it isn't.
China's Dangerous Debt Drag
William Pesek (Bloomberg View) Feb 9, 2015
Amid slowing growth, more stimulus isn't the answer.
Second-Guessing the Global Economic Funk
Conrad de Aenlle (NYT) Feb 9, 2015
If the global economy manages to avoid severe recession and deflation, investors can take advantage of that through energy stocks, junk bonds and emerging market stocks.
Brazil's Rousseff Pours Gas on Petrobras Fire
Bloomberg View Feb 9, 2015
Asking Brazil's Workers' Party to clean up Petrobras is like asking a child to give up its piggy bank.
Greece and a final all-in bet
AT Feb 9, 2015
Greece is now betting everything that Europe will not allow it to exit the euro, hoping that "this time is not different", and that Europe will concede that spending a few more billion on Greece's bridge program is worth it to avoid what could potentially spiral into an out of control collapse.
Tsipras Lays Out Part of the Road Map for Greece
Mohamed A. El-Erian (Bloomberg View) Feb 9, 2015
The new Greek prime minister took unnecessary risks in his first speech to parliament.
The World According to Angela Merkel
Leonid Bershidsky (Bloomberg View) Feb 9, 2015
Angela Merkel's seeming inconsistency has always been tactical rather than strategic.
Is Greece Europe's First Domino?
Mark Gilbert (Bloomberg View) Feb 9, 2015
The EU needs to recognize that the repercussions of a country leaving the euro are impossible to predict.
Banks Will Charge Extra for Not Manipulating FX
Matt Levine (Bloomberg View) Feb 9, 2015
Finance is about managing and allocating risk, and one of the most important risks in the corporate world is the risk of looking slightly stupid.
Argentina’s Lessons for Greece
Raquel Fernández and Jonathan Portes (Project Syndicate) Feb 9, 2015
Thirteen years ago, Argentina was in dire straits, with a currency pegged to unrealistic levels, high debt, and an unsustainable bailout program. Today, with Greece facing many of the same challenges, it is worth considering what the country's leaders and creditors can learn from Argentina's policy response.
A Call to Antimicrobial Arms
Jim O'Neill (Project Syndicate) Feb 9, 2015
The world urgently needs new drugs to replace the antimicrobial drugs that are losing effectiveness, but the incentives to invest in research are missing. A solution need not be expensive, especially when compared to the alternative: $100 trillion in lost output by 2050 and ten million deaths every year.
Cheap Oil for Change
Kaushik Basu and Sri Mulyani Indrawati (Project Syndicate) Feb 9, 2015
The recent decline in oil prices is likely to have a major, largely positive impact on the global economy – even greater than most observers seem to recognize. If governments take advantage of lower oil prices today to implement key energy-policy reforms, the benefits may improve structural features of their economies tomorrow.
Greece is Playing to Lose
Anatole Kaletsky (Project Syndicate) Feb 9, 2015
Europe’s future now depends on something that seems impossible: Greece and Germany must strike a deal. But the two sides’ principled opposition – Greece demands debt forgiveness, while Germany has insisted that not a single euro can be written off – is not the main obstacle.
The Recent Rise and Fall of Rapid Productivity Growth
John Fernald and Bing Wang (PIMCO) Feb 9, 2015
Information technology fueled a surge in U.S. productivity growth in the late 1990s and early 2000s. However, this rapid pace proved to be temporary, as productivity growth slowed before the Great Recession. Furthermore, looking through the effects of the economic downturn on productivity, the reduced pace of productivity gains has continued and suggests that average future output growth will likely be relatively slow.
Will Greece Ever Get Out of Debtor’s Prison?
Teresa Tritch (NYT) Feb 10, 2015
It’s time for a joint solution between Greece, which has more debt than it can ever repay, and its creditors.
Greece’s Antireform
WSJ Feb 10, 2015
More austerity for the private economy, less for the government.
Greece: An Economic Tragedy in Six Charts
Paolo Mauro and Jan Zilinsky (PIIE) Feb 10, 2015
Greece's economy has spiraled downward since 2009, at great human cost. A newly elected government headed by Prime Minister Alexis Tsipras is demanding relief from its reform and restructuring program.
Greece: Incremental Solutions Will Not Work
Ajai Chopra (PIIE) Feb 10, 2015
The impasse between Greece's new government and the rest of the euro area arose from bad policy decisions made in 2010. Numerous commentators warned at the time that Greece was insolvent and that debt restructuring or default was inevitable.
The Swiss Franc and The Tragedy of the Euro
Philipp Bagus (Mises Daily) Feb 10, 2015
Recent developments in Switzerland and the European Monetary Union.
The ECB Should Stay Out of Politics
Clive Crook (Bloomberg View) Feb 10, 2015
The European Central Bank doesn't get to decide which countries deserve to be members of the euro area.
Project Syndicate
John F. Kerry (Project Syndicate) Feb 10, 2015
In recent years, it has become fashionable to claim that challenges like Russian aggression and violent extremism signify that the international system is somehow unraveling. But all the evidence points to the opposite conclusion: the future still belongs to the universal values of civility, reason, and the rule of law.
An Accidental Currency War?
Mohamed A. El-Erian (Project Syndicate) Feb 10, 2015
Six and a half years after the global financial crisis, central banks in emerging and developed economies alike are continuing to pursue unprecedentedly activist – and unpredictable – monetary policy. How much road remains in this extraordinary journey?
China’s War on Western Values
Minxin Pei (Project Syndicate) Feb 10, 2015
The news from China these days is mostly depressing, owing to the government’s escalating crackdown on its critics. But what few observers seem to comprehend is that the regime’s retrograde politics will have serious consequences for China’s continued economic development.
The Greek Austerity Myth
Daniel Gros (Project Syndicate) Feb 10, 2015
The victory of the anti-austerity Syriza party in Greece’s general election has raised fears of a return to the uncertainty of 2012, when many thought that a Greek default and exit from the eurozone were imminent. But this time really is different.
Fair debt relief for Greece: New calculations
Thomas Philippon (VoxEU) Feb 10, 2015
Greece has a problem with debt that must be addressed on way or the other. This column proposes a way to estimate a ‘fair’ level of fiscal consolidation in Greece. The author’s central argument is that contagion risk made the Greek crisis worse by preventing early debt restructuring. If restructuring took place in 2010 instead of 2012, Greece’s debt to GDP ratio would have been 30 percentage points lower today. To bring Greece’s debt under 120% of GDP, it would be fair for Greece to run a 3% primary surplus over the next decade or two. This is less than the current target of 4.5% but still requires a significant effort.
Meet Greece Halfway, Europe
Bloomberg View Feb 11, 2015
Greece's new finance minister is scheduled to make a proposal to his European Union counterparts. The importance of this negotiation would be hard to exaggerate.
Rousseff Is Brazil's Crisis
Mac Margolis (Bloomberg View) Feb 11, 2015
Brazil's president doesn't have many fans right now.
The Middle-Class Comeback Is Under Way
Ruchir Sharma (WSJ) Feb 12, 2015
In 2013, the consumer item with the fastest sales growth was private jets. Last year: used cars and trucks.
No, India's Isn't Growing Like China
William Pesek (Bloomberg View) Feb 12, 2015
The country's fundamentals remain weak.
Currency Wars Have a Nuclear Option
Mark Gilbert (Bloomberg View) Feb 12, 2015
As currency wars intensify, central bankers may start considering capital controls.
Ukraine's IMF Bailout Is Small Enough to Work
Leonid Bershidsky (Bloomberg View) Feb 12, 2015
Ukraine's new IMF aid won't make it rich, but it could be enough to stimulate real reforms.
Growth, not Grexit
Anna Diamantopoulou (Project Syndicate) Feb 12, 2015
Greece's European partners need to understand that the country's recent election result was an explicit rejection of five years of policies that have failed to deliver the expected results. All parties need to stop talking about "game theory" and work together to put a feasible plan on the table.
The Global Economy’s Chinese Headwinds
Adair Turner (Project Syndicate) Feb 12, 2015
Last year, the global economy was supposed to start returning to normal, with interest rates rising in the US and the UK, inflation emerging in Japan, and a private credit-led recovery beginning in the eurozone. Twelve months later, normality seems as distant as ever – and economic headwinds from China are a major cause.
Central Banks and the Bottom Line
Barry Eichengreen and Beatrice Weder di Mauro (Project Syndicate) Feb 12, 2015
Around the world, central banks' balance sheets are becoming an increasingly serious concern not only for their critics, but also for central bankers themselves. But it is a mistake for monetary policymakers to allow balance-sheet profits and losses to guide their decision-making.
To Spend in India, First Cut Taxes
Dhiraj Nayyar (Bloomberg View) Feb 13, 2015
High rates don't do any good if people don't pay.
What Happened to the Chinese Shopper?
William Pesek (Bloomberg View) Feb 13, 2015
The middle class isn't spending.
Band-Aids for Greece, Ukraine and Global Economy
Mohamed A. El-Erian (Bloomberg View) Feb 13, 2015
International gatherings this week only succeeded in slowing three threats to the global economy.
Why German Growth Beat Expectations
Leonid Bershidsky (Bloomberg View) Feb 13, 2015
Low interest rates and growing wages have turned Germans into bigger spenders than they've been in a long time, and that is helping economic growth.
Our Alice-in-Wonderland Bond Markets
Mark Gilbert (Bloomberg View) Feb 13, 2015
Top companies can now get money that's not just cheap, not even just free, but which actually pays them for borrowing.
Greece Is Cutting Line For Debt Relief
Leonid Bershidsky (Bloomberg View) Feb 13, 2015
If Greece receives debt relief, what about its poorer and better governed neighbors?
Argentina's Bond Mess Gets Slightly More Complicated
Matt Levine (Bloomberg View) Feb 13, 2015
Holders of Argentina's bonds sued in London to reverse a New York order preventing them from being paid in Belgium. Cool cool.
Reforming Greek Reform
Dani Rodrik (Project Syndicate) Feb 13, 2015
In the short to medium run, increasing Greek competitiveness requires remedies targeted at specific binding constraints faced by exporters. A Greek program that identifies these constraints and proposes remedies would be much better economics than blind adherence to the current laundry list of structural reforms.
Putin’s European Fifth Column
Yuriy Gorodnichenko, Gérard Roland and Edward W. Walker (Project Syndicate) Feb 13, 2015
If the world should have learned one thing from the recent months of tensions between Russia and the West, it is that Russian President Vladimir Putin’s strategic ambition and skill should never be underestimated. It is in this light that the West should view Putin’s recent overtures to some within the European Union.
Empowering India's Poor
Sanjeev Ahluwalia (Globalist) Feb 15, 2015
What Modi’s BJP Party can learn from the upheaval in Southern Europe.
Weimar on the Aegean
Paul Krugman (NYT) Feb 16, 2015
Greek debt and the lessons of history.
Two cheers for Piketty: Or, why both he and the OECD and nearly everyone else are wrong on growth. Part 1
Rupert Read (OECD Insights) Feb 16, 2015
Piketty’s alleged-updating of Marx, Capital in the 21st century, is taking the intellectual world by storm. I’m delighted that such an improbable happening can occur in our rather-impoverished public sphere, and pleased to cheer him on.
Easing Won't Be Easy in China
William Pesek (Bloomberg View) Feb 16, 2015
The central bank has less room to maneuver than many think.
Get Ready for $10 Oil
A. Gary Shilling (Bloomberg View) Feb 16, 2015
Rising oil production and falling demand will combine to drive oil prices lower.
Earth Calling the Financial Sector
Jeffrey D. Sachs and Hendrik J. du Toit (Project Syndicate) Feb 16, 2015
Financial markets serve two crucial purposes: to channel savings toward productive investments, and to enable individuals and businesses to manage risks. That is why the sector is essential to sustainable development, which represents unprecedented global-scale investment opportunities and risk-management challenges.
Transparent financial benchmarks
Darrell Duffie, Piotr Dworczak and Haoxiang Zhu (VoxEU) Feb 16, 2015
Trillions of dollars’ worth of transactions depend on financial benchmarks such as LIBOR, but recent scandals have called their reliability into question. This column argues that reliable benchmarks reduce informational asymmetries between customers and dealers, thereby increasing the volume of socially beneficial trades. Indeed, the increase in trading volume may offset the reduction in profit margins, giving dealers who can coordinate an incentive to introduce benchmarks. The authors argue that benchmarks deserve strong and well-coordinated support by regulators around the world.
Disinflation in non-Eurozone EU nations
Plamen Iossifov and Jirí Podpiera (VoxEU) Feb 16, 2015
The ongoing, synchronised disinflation across Europe raises the question of whether non-Eurozone EU countries are affected by the undershooting of the Eurozone inflation target, by other global factors, or by synchronised domestic, real sector developments. This column argues that falling world food and energy prices have been the main disinflationary driver. However, countries with more rigid exchange-rate regimes and/or higher shares of foreign value added in domestic demand have also been affected by disinflationary spillovers from the Eurozone.
Tracking GDP when long-run growth is uncertain
Juan Antolin-Diaz, Thomas Drechsel and Ivan Petrella (VoxEU) Feb 17, 2015
Evidence of a decline in long-run growth is accumulating. However, many important questions remain unanswered. The analysis in column employs recent econometric techniques to provide an answer to some of the pertinent questions. The findings indicate that the weakness of the current recovery in the G7 is associated with a decline in the long-run growth rate of labour productivity.
Shanghai drops GDP goal
Michael Lelyveld (AT) Feb 17, 2015
Shanghai, China's financial power center, is setting a policy precedent for the country by this year not issuing an economic growth target, which are usually a staple of national economic policy.
Two cheers for Piketty: Or, why both he and the OECD and nearly everyone else are wrong on growth. Part 2
Rupert Read (OECD Insights) Feb 17, 2015
Piketty has shied away from grasping the uncomfortable implication of his own data: that growthist capitalism is an engine for inequality both in the present and over much longer timescales.
Tsipras Needs to Rethink His Timetable
Mohamed A. El-Erian (Bloomberg View) Feb 17, 2015
Greece has already had to learn unpleasant lessons that complicate its efforts and fuel public confrontation with some of its European partners.
Three Reasons Merkel Is so Stubborn
Mark Gilbert (Bloomberg View) Feb 17, 2015
Why is German Chancellor Angela Merkel being so relentlessly uncompromising? Here are three possible explanations.
Congress's Currency Paranoia
Ramesh Ponnuru (Bloomberg View) Feb 17, 2015
Overblown fears about currency manipulation may threaten free-trade deals. That would be terrible.
Enjoy Cheap Oil, Fear the Deflation
A. Gary Shilling (Bloomberg View) Feb 17, 2015
Cheap oil's winners, losers and deflation.
Gender Equality as a Development Goal
Bjørn Lomborg (Project Syndicate) Feb 17, 2015
Most people around the world agree that men and women should be treated equally, and we also know that empowering women is a highly effective way to help families and societies lift themselves out of poverty. So how can we achieve the most gender equality at the lowest cost?
Put Up or Shut Up
Lucy P. Marcus (Project Syndicate) Feb 17, 2015
There is no easy solution for the eurozone economy, for Greece, for Ukraine, or for any of the other major challenges we face today. But unless protagonists are sure that announcements, campaign promises, and peace agreements will give rise to clear, purposeful action, they should think twice before opening their mouths.
Animal Spirits and Business Cycles
Rhys Bidder (FRBSF Econ Letter) Feb 17, 2015
Animal spirits are often suggested as a cause of business cycles, but they are very difficult to define. Recent research proposes a novel explanation based on the changing level of risk over time and people’s uncertainty about how the world works. The interaction of these two can lead to significant business cycle fluctuations in response to spikes in volatility. This finding gives researchers an alternative to irrational behavior as an explanation for why swings in consumer sentiment appear to drive the business cycle.
Innovation and creative cities: New evidence
Neil Lee and Andrés Rodríguez-Pose (VoxEU) Feb 17, 2015
Creativity is assumed to be the mother of invention, but research testing whether this is the case is surprisingly rare. This column addresses this gap in the literature by assessing whether firms in creative industries in the UK are more innovative than firms outside creative industries. The authors also examine whether the location of creative-industry firms in creative cities – and the size of creative cities – matters for the innovative capacity of these firms.
China at rule-of-law turning point
Francesco Sisci (AT) Feb 18, 2015
Establishing the rule of law is one of the pillars of Chinese President Xi Jinping's reform program and surely one of the most important, for without confidence in the legal system many other things will go wrong. The new emphasis on the rule of law implies a deep cultural shift, from traditional reference points of clan and emperor to the Western concept of a public entity. China cannot go back from there.
Germany’s Position on Greece: A Reality Check
Stephan Richter (Globalist) Feb 18, 2015
It’s not about debt forgiveness now, but what Greece must do to reshape itself.
How to Build in India
Dhiraj Nayyar (Bloomberg View) Feb 18, 2015
First, build a better bond market.
Oil Traders' Invisible Hand
Leonid Bershidsky (Bloomberg View) Feb 18, 2015
Perceptions matter much more to the price of of oil than supply and demand.
Free Trade Makes Cancer Drugs Cheaper
Caroline Freund (Bloomberg View) Feb 18, 2015
The U.S. should meet its Pacific trading partners halfway and reduce the 12-year patent protection period for prescription drugs.
Fed Still Likely to Hike Rates This Summer
Mohamed A. El-Erian (Bloomberg View) Feb 18, 2015
The Fed recognizes the improvement of the domestic economy, but the minutes show central bank is in no rush to declare liftoff for economic growth.
Are Emerging Markets Losing Their Appeal?
William Pesek (Bloomberg View) Feb 18, 2015
The easy money is looking elsewhere now.
New Frontiers in Development Finance
Mahmoud Mohieldin and Marco Scuriatti (Project Syndicate) Feb 18, 2015
Since 2000, the Millennium Development Goals have guided significant progress on several important aspects of development. In order to ensure that the next development agenda produces even more progress, world leaders must refine the MDG framework – beginning with its sources of financing.
GVCs, exchange rates and exports: Swiss evidence
Dario Fauceglia, Andrea Lassmann, Anirudh Shingal, Martin Wermelinger (VoxEU) Feb 18, 2015
The sharp appreciation of the Swiss franc has once more raised fears about negative export growth and resulting losses for Swiss exporters. However, this column suggests that the Swiss economy’s high level of integration into global value chains potentially mitigates these negative effects by rendering imported intermediate inputs cheaper, thus reducing pressures on profit margins through the imported inputs channel.
Measuring identity in the tropics
Sara Lowes, Nathan Nunn, James A Robinson, Jonathan Weigel (VoxEU) Feb 18, 2015
Ethnic identity can fracture nations – it is a leading explanation of the Boko Haram insurgency in Nigeria. This column presents evidence from a psychological test that reveals how members of different ethnic groups from the Democratic Republic of the Congo form their respective ethnic identities. This Implicit Association Test reveals that people have a small, statistically significant bias towards own-group. The magnitude suggests that biases are consciously held, rather than being a conditioned response.
Monetary policy and housing prices: Lessons from 140 years of data
Òscar Jordà, Moritz Schularick and Alan Taylor (VoxEU) Feb 18, 2015
Housing played a major role in the Global Crisis, and some worry that the ultra-low interest rate environment is inflating new housing bubbles. Using 140 years of data from 14 advanced economies, this column provides a quantitative measure of the financial stability risks that stem from extended periods of ultra-low interest rates. The historical insights suggest that the potentially destabilising by-products of easy money must be taken seriously and weighed carefully against the stimulus benefits. Macroeconomic stabilisation policy has implications for financial stability, and vice versa. Resolving this dichotomy requires central banks greater use of macroprudential tools.
GDP-linked Bonds: Can Argentina's Failure Become Greece's Success?
Angel Ubide and Eduardo Levy Yeyati (PIIE) Feb 19, 2015
The new Greek government has floated the idea of swapping the official Greek debt that is now held by EU countries and the European Stability Mechanism (ESM) with GDP-indexed bonds. The proposal has received support from some in the economics profession in various forums, for example here.
Europe and Greece Are at War Over Nothing
Bloomberg View Feb 19, 2015
Europe's dispute with Greece is less over principles than semantics.
What Germany Owes Greece
Clive Crook (Bloomberg View) Feb 19, 2015
If Germany's leaders believe in the EU's pooling of sovereignty, they have a duty of care and respect to non-Germans.
Trade Futures, Save the Planet
Mark Gilbert (Bloomberg View) Feb 19, 2015
Just as derivatives help farmers manage crop prices, futures contracts can offset the vagaries of the weather to help wind and solar solve climate change.
The Age of Adaptation
Klaus Schwab (Project Syndicate) Feb 19, 2015
The post-crisis era is over, and the “post-post-crisis world" is upon us. It is time to adopt a new framework of realistic solutions that promote shared prosperity even as economic systems, governments, security structures, and people's daily lives change at a breakneck pace.
Africa’s Path from Poverty
Justin Yifu Lin (Project Syndicate) Feb 19, 2015
Every developing country has a window of opportunity for rapid income growth as it transforms itself from an agrarian economy into one that is urban, dynamic, and industrialized. That was true in the nineteenth and twentieth centuries, and it remains true today.
Getting companies to invest long-term
Alex Edmans, Vivian W Fang and Katharina Lewellen (VoxEU) Feb 19, 2015
The problem of ‘managerial myopia’ – managers maximising short-term earnings at the expense of long-term investment – is well known. This column explores three elements that play a role in the problem: CEO compensation, shareholder structure, and information disclosure. Though all three practices are sometimes appropriate, they come with important costs that need to be considered by policymakers and practitioners.
Corporate cash piles and financial shocks
Philippe Bacchetta, Kenza Benhima and Céline Poilly (VoxEU) Feb 19, 2015
The corporate cash ratio – the share of liquid assets in total assets – comoves with employment in the US. This column argues that disentangling liquidity shocks and credit shocks is key to understanding this comovement, and that liquidity shocks appear to be crucial. These shocks make production less attractive or more difficult to finance, while they also generate a need for internal liquidity to pay wages, which can be satisfied by holding more cash.
How Grexit Could Happen
Christian Schulz (Globalist) Feb 20, 2015
How do you exit the euro? It has never been done before.
Greece’s Future After Grexit
Christian Schulz (Globalist) Feb 20, 2015
Euroskeptics have long provided a positive story of Greece after euro exit. Is it for real?
The Euro Beyond Greece: Getting Larger, Not Smaller
John Stevens (Globalist) Feb 20, 2015
Danes, Swiss and British may ultimately join the euro.
Is Japan Asia's Next Autocracy?
Noah Smith (Bloomberg View) Feb 20, 2015
Japan is considering changes to its constitution that would move it away from liberal democracy and toward autocracy.
The New, Boring Banking
Matt Levine (Bloomberg View) Feb 20, 2015
Also: Freddie Mac is a creature of accounting, and RadioShack could once again be a creature of random cables.
You Say Debt Relief, I Say Theft
Leonid Bershidsky (Bloomberg View) Feb 20, 2015
A government can expropriate its creditors anytime it wants and it's a big mistake to pretend otherwise.
Why Public Investment?
Michael Spence (Project Syndicate) Feb 20, 2015
The world is facing the prospect of an extended period of weak economic growth. But risk is not fate: The best way to avoid such an outcome is to figure out how to channel large pools of savings into productivity-enhancing public-sector investment.
The Non-Problem of Chinese Currency Manipulation
Jeffrey Frankel (Project Syndicate) Feb 20, 2015
The US Congress is once again considering measures aimed at China's supposed undervaluation of its currency. But if China allowed the renminbi to float freely, it would be more likely to depreciate than rise against the dollar, making it harder for US producers to compete in international markets.
How Greece Got Outmaneuvered
John Cassidy (New Yorker) Feb 20, 2015
The E.U. finance ministers reached a deal with Greece on Friday, but the game isn’t over.
Tax progressivity and tax revenue
Hans Holter, Dirk Krueger and Serhiy Stepanchuk (VoxEU) Feb 20, 2015
Since the Global Crisis, debt sustainability has received increasing attention. This column argues that the maximum sustainable debt level depends negatively on the progressivity of the tax system. The authors estimate that the US is still relatively far from the peak of its Laffer curve and from its maximally sustainable debt level. However, adopting a flat tax would raise the maximum sustainable debt from 330% to more than 350% of benchmark GDP, whereas adopting Danish-style progressivity would lower it to less than 250%.
Greece: No escape from the inevitable
Lars P Feld, Christoph M Schmidt, Isabel Schnabel, Benjamin Weigert and Volker Wieland (VoxEU) Feb 20, 2015
Claims that ‘austerity has failed’ are popular, especially in the Anglo-Saxon world. This column argues that this narrative is factually wrong and ignores the reasons underlying the Greek crisis. The worst move for Greece would be to return to its old ways. Greece needs to realise that things could actually become much worse than they are now, particularly if membership in the Eurozone cannot be assured. Instead of looking back, Greece needs to continue building a functioning state and a functioning market economy.
Global sourcing: New evidence from Spanish firms
Wilhelm Kohler and Marcel Smolka (VoxEU) Feb 20, 2015
The share of international trade within firm boundaries varies greatly across countries. This column presents new evidence on how the productivity of a firm affects the choice between vertical integration and outsourcing, as well as between foreign and domestic sourcing. The productivity effects found in Spanish firm-level data suggest that contractual imperfections distort the sourcing of inputs in the global economy, and that firm boundaries emerge in response to mitigate this distortion.
Growth quality: A new index
Montfort Mlachila, René Tapsoba and Sampawende Tapsoba (VoxEU) Feb 21, 2015
Despite the consensus that growth alone does not need to lead to better social outcomes, a formal quantification of the quality of growth is still missing. This column seeks to bridge this gap by proposing a new quality of growth index that captures both the intrinsic nature and the social dimension of growth. This index could legitimately be part of the benchmarking tools for guiding policies toward more inclusive growth.
Capital flow waves to and from Switzerland
Pinar Yesin (VoxEU) Feb 21, 2015
Safe haven inflows to Switzerland during global turmoil have been mentioned numerous times by the financial press and international organisations. However, recent research cannot find evidence for surges of capital inflows to Switzerland. In fact, this column argues that private capital inflows to and outflows from Switzerland have become exceptionally muted and less volatile since the Crisis. By contrast, net private capital flows have shown significantly higher volatility since the Crisis, frequently registering extreme movements. However, these extreme movements in net flows are not driven by surges of inflows.
The Fed’s global responsibilities
Gavyn Davies (FT) Feb 22, 2015
When the Federal Reserve starts to raise US interest rates later this year, there will be a major shift in the global monetary regime.
The Next Greek Crisis
WSJ Feb 22, 2015
Europe extends its bailout of Athens—and pretends it might work.
Who Made Germany Europe's Boss?
Clive Crook (Bloomberg View) Feb 22, 2015
Today, Greece. But which EU member will Germany try to bully tomorrow?
Austerity pays off after all
Benjamin Born, Gernot Müller and Johannes Pfeifer (VoxEU) Feb 22, 2015
Many observers blame austerity for much of the Eurozone’s current economic woes. This column presents new evidence on how financial markets assess austerity. Cutting government consumption raises the sovereign default premium in the short run. However, austerity pays off in the long run.
Fretting About the Yuan
WSJ Feb 23, 2015
Beijing again deserves credit for keeping its currency steady.
Year of the Sheep, Century of the Dragon?
Pepe Escobar (AT) Feb 23, 2015
Seen from the Chinese capital as the Year of the Sheep starts, the malaise affecting the West seems like a mirage in a galaxy far, far away. On the other hand, the China that surrounds you looks all too solid and nothing like the embattled nation you hear about in the Western media, with its falling industrial figures, its real estate bubble, and its looming environmental disasters.
Too-thrifty Germany
Stefan Haus (AT) Feb 23, 2015
Thriftiness has served Germany well in the past, but the German culture of austerity suffers from selective memory - which may yet be jogged by the growing number of economists and others calling for debt relief for crisis-stricken Greece.
India’s Economy: Next Steps
Sanjeev Ahluwalia (Globlist) Feb 23, 2015
How to shape the economic structures of the world’s second most populous nation.
China May Be Stalling Out and That's OK
William Pesek (Bloomberg View) Feb 23, 2015
At least unemployed protesters aren't filling the streets.
Now Comes the Hard Part for Greece
Mohamed A. El-Erian (Bloomberg View) Feb 23, 2015
What lies ahead to resolve the Greek crisis is many orders of magnitude more difficult than what was achieved Friday.
The Putin Effect on Post-Soviet Economies
Leonid Bershidsky (Bloomberg View) Feb 23, 2015
It's no coincidence that the five worst-performing currencies in the world are all post-Soviet.
The Immorality of Coal
Raja Jayaraman, Jonathan Keren-Black, Thea Ormerod and Stephen Pickard (Project Syndicate) Feb 23, 2015
The coal industry seems determined to fight for profits at the expense of the global environment, perversely attempting to capture the moral high ground by claiming that coal is essential to ending energy poverty. In fact, at this point in history, coal is not good for anyone.
The Power of a European Energy Union
Eamon Ryan (Project Syndicate) Feb 23, 2015
European Commission President Jean-Claude Juncker is right to make a European energy union one of his top priorities. Done properly, a more cohesive energy policy could achieve three strategic objectives simultaneously: help meet climate targets, provide much-needed economic stimulus, and protect Europe from supply shocks.
The Rule of the Lawless
Chris Patten (Project Syndicate) Feb 23, 2015
Nothing guarantees free societies' liberties as much as application of the rule of law with equal force to the governed and the governing. Unfortunately, these societies have failed to uphold international norms as well, exposing them to assaults by political leaders who ignore the rule of law at home.
Obama’s Oil-by-Rail Boom
Holman W. Jenkins, Jr. (WSJ) Feb 24, 2015
Activists get their jollies blocking pipeline construction, but the crude still flows through your neighborhood.
How Greece's Creditors Can Encourage Its Return to Stability
Avinash Persaud (PIIE) Feb 24, 2015
Now that over 75 percent of Greece's debt has been transferred from private banks to the official sector backed by European taxpayers—there is a novel solution to the Greek tragedy that would satisfy the interests of borrowers as well as creditors. This solution could also temper unhelpful nationalism on both sides and doesn't promote future fiscal irresponsibility.
Greece's Reprieve: In Praise of Kicking the Can Down the Road
Paolo Mauro (PIIE) Feb 24, 2015
The melodrama in Greece has produced demands that Athens and its European partners take decisive action to fix a complicated situation once and for all. In fact, kicking the can down the road—as the players did recently to avert a financial crisis—is an underrated and long-standing feature of debtor-creditor relations.
Greece Must Stop Grandstanding and Start Governing
Angel Ubide (PIIE) Feb 24, 2015
Greece's last-minute agreement with the Eurogroup on Febuary 20 averted a potential major financial disaster. The Greek government was days from running out of money to pay the bills.
The “Plucking Model” of Recessions and Recoveries
Gregory Claeys and Thomas Walsh (Bruegel) Feb 24, 2015
The speed of economic recoveries is generally attributed mainly to economic policies. While this view might be true, a theory suggested by Milton Friedman in 1964 proposes a complementary hypothesis: strong recoveries are just natural after particularly deep recessions. This blog investigates the relevance of Friedman's theory for the recoveries currently taking place in Europe.
Janet Yellen's 3-Part Message to Congress
Mohamed A. El-Erian (Bloomberg View) Feb 24, 2015
The Fed chair will seek to reassure Congress that, having exited quantitative easing in October, the central bank is on course to normalize interest rates in a careful and gradual manner.
Turkey's Central Bank Fiasco
Mark Gilbert (Bloomberg View) Feb 24, 2015
Turkey should stop dissing its central bank or risk suffering the consequences of an investor backlash.
Metal Manipulation and Negative Rates
Matt Levine (Bloomberg View) Feb 24, 2015
Also: Greece, socially beneficial high-frequency trading, and whistleblower rewards and punishments.
Steady on the Renminbi
Stephen S. Roach (Project Syndicate) Feb 24, 2015
As China's exports sag and the risk of deflation grows, many believe that a reversal in currency policy is the most logical course. But intervening to weaken the exchange rate would be a serious mistake.
Why is Monetary Policy Underrated?
Koichi Hamada (Project Syndicate) Feb 24, 2015
Despite the European Central Bank's decision to launch quantitative easing, many economists, policymakers, and central bankers continue to underestimate unconventional monetary policy. But, to understand QE's transformative potential, they need only look to its recent success in Japan.
The Economic Consequences of Greece
Alberto Bagnai, Brigitte Granville, Peter Oppenheimer and Antoni Soy (Project Syndicate) Feb 24, 2015
The adoption of a common currency has undermined the European Union's founding vision, threatening the stability of the continent. The turmoil in Greece is an opportunity to evaluate the decisions that led to the crisis and chart a course for dissolution of the eurozone.
The cost competitiveness obsession
Konstantins Benkovskis and Julia Woerz (VoxEU) Feb 24, 2015
There is no single replicable and comprehensive indicator of competitiveness that can be applied to various entities. In this column, the authors propose a novel decomposition of market share growth that captures non-price factors, such as quality or tastes. The findings imply that relying solely on price factors to determine a country’s competiveness might be misleading. For instance, central for boosting China’s presence in the global market were improvements in non-price factors. The role played by the exchange rate has been less important.
Why the taxpayer is on the hook
Hans-Werner Sinn (VoxEU) Feb 24, 2015
It has been debated whether taxpayers would have to foot the bill from different ECB government bonds purchase programmes. This column argues that for the participants of such programmes that involve the mutualisation of interest revenues, there is no free lunch.
Defining ‘responsible’ fiscal policy for Europe
Marco Buti and Nicolas Carnot (VoxEU) Feb 24, 2015
In an uncertain world, fiscal policy must be robust to a range of models. This column introduces a rule of thumb governing fiscal expansion that is consistent for a group of countries, and for each country individually. Applying this rule to the Eurozone recommends overall fiscal neutrality, with moderate consolidation in France and Spain, lower consolidation in Italy, and moderate stimulus in Germany. This policy is optimal for Germany even without taking into account positive spillovers to other members.
The cost competitiveness obsession
Konstantins Benkovskis and Julia Woerz (VoxEU) Feb 24, 2015
There is no single replicable and comprehensive indicator of competitiveness that can be applied to various entities. In this column, the authors propose a novel decomposition of market share growth that captures non-price factors, such as quality or tastes. The findings imply that relying solely on price factors to determine a country’s competiveness might be misleading. For instance, central for boosting China’s presence in the global market were improvements in non-price factors. The role played by the exchange rate has been less important.
The precarious state of the global economy
FT Feb 25, 2015
The G20 governments should look towards boosting fiscal stimulus.
Venezuela: the case for default
Jonathan Wheatley (FT) Feb 25, 2015
A shipment of gold to Switzerland has reassured investors, but default on Friday cannot be ruled out.
Infighting at the top puts the Indian economy at risk
Swaminathan Aiyar (FT) Feb 25, 2015
Sitting on the fence will not do. Mr Jaitley should defer to Mr Rajan.
EM ex-China growth slips below that of developed world
Steve Johnson (FT) Feb 25, 2015
First reversal of convergence trend since 1999 threatens livelihoods of billions.
Brexit: Fraying union
Richard Milne and Peter Spiegel (FT) Feb 25, 2015
Without Britain, countries such as Denmark will find it harder to keep voters on the EU path.
Four Months to Get It Right on Greece
NYT Feb 25, 2015
European leaders extended the loan program, but they did not resolve any of the big problems that have grounded the Greek economy.
Meltdown in Venezuela
WSJ Feb 25, 2015
Maduro arrests the opposition as the economy worsens.
China slows growth in demand for oil
Michael Lelyveld (AT) Feb 25, 2015
After years of driving world energy markets, the growth of China's oil demand is slowing to a crawl. It is now estimated to rise at an average annual pace of 2.6% through 2020 - about half the rate during China's expansion of the previous decade.
Russia in Free Fall
Anders Åslund (PIIE) Feb 25, 2015
Since November 2014, it has been obvious that the Russian economy would shrink sharply this year, and the January statistics indicate a serious decline has started. The Russian Ministry of Economic Development has forecast a decline of GDP of 3 percent this year, while the Central Bank of Russia predicts a decline of 4.5 to 5 percent at an oil price of $50 per barrel.
All Quiet Now, But Can Greece Really Thrive Inside the Euro?
George Magnus (Globalist) Feb 25, 2015
Despite a deal being provisionally cut with Greece, a new chapter of European instability is only just starting.
Can Asia Afford Low Taxes?
William Pesek (Bloomberg View) Feb 25, 2015
A competitive advantage may now be a liability.
Europe Weans Itself Off Bank Loans
Mark Gilbert (Bloomberg View) Feb 25, 2015
Peer-to-peer lending can help bridge Europe's funding gap.
What Milton Friedman Would Do for Greece
Leonid Bershidsky (Bloomberg View) Feb 25, 2015
Applying Milton Friedman's "plucking model" to Europe shows that specific economic policies don't matter much for recoveries.
Greece vs. Europe: Who Won?
Clive Crook (Bloomberg View) Feb 25, 2015
Neither side caved in the battle between Greece and Europe, because nothing has been decided.
A Greek Deal and What It Means
Jacob Funk Kirkegaard (PIIE) Feb 25, 2015
Greece and the Eurogroup have struck a deal designed to avoid another economic meltdown and even return Greece to economic growth. An additional four months have been added to an earlier two-month extension of the review of Greece's economic reform program, giving Athens and its partners until the end of June to reach a more comprehensive arrangement.
The Visible Hand of Economic Prosperity
Jürgen Jeske (Project Syndicate) Feb 25, 2015
Germany has weathered the financial crisis much better than most of its neighbors: exports are up, unemployment is half the European average, and the federal budget is balanced for the first time in a decade. But it would be a mistake to assume that Germany's economic performance vindicates its policymaking.
Obama Steps Up
Simon Johnson (Project Syndicate) Feb 25, 2015
For the past six years, Barack Obama's administration has, more often than not, sided with the interests of big banks on financial-sector policy. But this week, announcing a new proposal to prevent conflicts of interest in financial advising, Obama seemed to turn an important corner.
A Five-Step Plan for European Prosperity
Michael J. Boskin (Project Syndicate) Feb 25, 2015
The challenges Europe is facing go well beyond the risk of a Greek exit from the euro. Overcoming the continent's economic stagnation and the fiscal pressures of bloated welfare states will require bold measures to restore growth, opportunity, prosperity, and financial stability.
The Price Paradox
Robert Skidelsky (Project Syndicate) Feb 25, 2015
Apostles of monetary expansion continue to believe that avoiding deflation is simply a matter of speeding up the printing press. But why should this be any more successful in the future than it has been in the last few years?
Causes of the 2014 oil price decline
Lutz Kilian (VoxEU) Feb 25, 2015
Between June and December 2014, the Brent price of crude oil fell by 44%, resulting in one of the most dramatic declines in the price of oil in recent history. This column presents a new quantitative analysis of the market for crude oil. According to the model the authors use, around half of the decline ($27) was predictable using publicly available information. A part of this decline was due to a slowdown in global economic activity, but the major part came from supply and demand shocks in the oil market. Nevertheless, there are reasons to expect the decline in oil prices to end soon.
The Greek Dilemma
Joseph Vann and Valbona Zeneli (Globalist) Feb 26, 2015
The “Big Fix” for Greece and how not to waste a good crisis.
Jobs Slowly Recovering From Crisis, Favoring Higher Skills
IMF Survey Feb 26, 2015
Today’s job market demands more specialized skills, with migration and technology helping—not hurting—chances of high-quality employment, according to the March 2015 issue of Finance & Development (F&D) magazine.
Labor's Declining Share in Manufacturing
Robert Z. Lawrence (PIIE) Feb 26, 2015
The slowdown in the growth of US wages in recent years is the result of many factors. Among them is the fact that in the last 15 years, the share of labor compensation as a portion of US total income has fallen below its normal cyclical variation.
Geoengineering Is Good Insurance
Bloomberg View Feb 26, 2015
Changing the climate on purpose makes some people uneasy. But if conventional efforts to counter global warming aren't enough, the world needs a fallback plan.
Europe’s Chimerical Capital-Markets Union
Howard Davies (Project Syndicate) Feb 26, 2015
At a time when Europe’s currency union is at risk, and its banking union remains at an early stage of development, the endlessly creative European Commission is embarking on another adventure: a so-called “capital markets union.” Given the current political climate, the new initiative is unlikely to have a transformational impact.
China’s Dual-Track Challenge
Andrew Sheng and Xiao Geng (Project Syndicate) Feb 26, 2015
With China's economic slowdown more apparent than ever, its prospects of avoiding a hard landing are weakening. Whether policymakers succeed will depend on whether they can navigate the challenges stemming from an increasingly divided economy.
Making Do With More
J. Bradford DeLong (J. Bradford DeLong) Feb 26, 2015
Ensuring that the workers of today and tomorrow can capture the benefits of the information age will require us to redesign our economic system. Only by finding ways to put true value on the goods we produce can we sustain a middle-class society, rather than one of techno-plutocrats and their service-sector serfs.
Emerging Economies’ Demographic Challenge
Martin Neil Baily and Jaana Remes (Project Syndicate) Feb 26, 2015
Population aging is often cited as a major economic challenge for the developed world. But shifting demographics pose an even greater threat to the growth prospects of many emerging economies, and only far-reaching productivity-enhancing reforms can ensure continued gains in prosperity.
Re-monopolizing China's Industry
Gordon G. Chang (WA) Feb 26, 2015
Twenty years after reformers in Beijing broke up the Maoist-era monopolies, a new round of government-directed mergers threatens to undermine China’s competitiveness.
Input specificity and the propagation of idiosyncratic shocks in production networks
Jean-Noël Barrot and Julien Sauvagnat (VoxEU) Feb 26, 2015
Recessions are contagious, but little is known about how adverse shocks spread through production networks. This column presents quantitative evidence on inter-firm contagion using natural disasters as exogenous instruments. Adverse shocks to upstream suppliers lower sales growth and valuation of a downstream firm.
Cross-border financial linkages: Identifying and measuring vulnerabilities
Philip R. Lane (VoxEU) Feb 26, 2015
There has been spectacular growth in cross-border financial linkages over the last 20 years. Moreover, boom-bust cycles in international financial flows have contributed to financial instability and financial crises in a number of countries. While the coverage of international financial datasets has sharply improved in recent years, this column introduces CEPR Policy Insight 77, explaining that the currently available data lacks the detailed information (in particular, the matrix of cross-border sectoral exposures) to provide a sufficient basis for risk surveillance and monitoring. Accordingly, a high priority for policymakers is to implement current proposals to improve the scope and quality of international financial data.
House prices, local demand, and retail prices
Johannes Stroebel and Joseph Vavra (VoxEU) Feb 26, 2015
Rising prices have long been a concern of monetary policymakers due to wealth effects on spending. This column presents evidence that local demand effects from house price increases result in significant local price inflation. Households living in locations with rapidly increasing real estate prices will also face rapidly increasing costs of goods purchased in local stores.
Liquidity risk and systemic banking crises
Daniel C Hardy and Philip Hochreiter (VoxEU) Feb 26, 2015
A minor adverse shock to financial markets can be propagated by liquidity strains, leading to a major crisis. This column suggests a novel measure to address systemic liquidity risk – a Macroprudential Liquidity Buffer, which would require financial institutions to hold systemically liquid assets in proportion to their liabilities less regulatory capital. This proportion varies positively with growth in system-wide funding needs, so the liquidity buffer increases when non-equity funding is growing.
Fiscal multipliers and Eurozone consolidation
Sebastian Gechert, Andrew Hughes Hallett and Ansgar Rannenberg (VoxEU) Feb 26, 2015
The literature on fiscal multipliers has expanded greatly since the outbreak of the Global Crisis.
The Implications of China’s Growth Slowdown
Brendan P. O'Reilly (Diplomat) Feb 26, 2015
Slowing Chinese growth could have repercussions that extend well beyond the economy.
China's investment law reformed - but still grey
Jean-Marc F Blanchard (AT) Feb 27, 2015
China's new Draft Foreign Investment Law has been hailed as a major overhaul of the existing foreign-investment regime, but it is clear there still is a huge amount of grey for overseas investors to contend with.
"Ruxit": Russia’s Exit from Europe
Josef Janning (Globalist) Feb 27, 2015
Unity in the EU has exacerbated the divide between Russia and Europe.
Greece Should Ponder the Benefits of Devaluation
Simeon Djankov (PIIE) Feb 27, 2015
Standard economic theory suggests that currency devaluation is a significant boon for export competitiveness and economic growth after a crisis. Although a direct devaluation is not available to Greece as a member of the euro area, the government in Athens should be considering other paths to that goal.
Argentina's Bonds Are Doing So Well, It Tried to Sell More
Matt Levine (Bloomberg View) Feb 27, 2015
Just because you sell bonds in London doesn't necessarily mean you didn't sell them "exclusively within" Argentina.
Debt and fiscal adjustment: Historical evidence
Julio Escolano, Laura Jaramillo, Carlos Mulas-Granados and Gilbert Terrier (VoxEU) Feb 27, 2015
Fiscal consolidation is back at the top of the policy agenda. This column provides historical context by examining 91 episodes of fiscal consolidation in advanced and developing economies between 1945 and 2012. By focusing on cases in which the adjustment was necessary and desired in order to stabilise the debt-to-GDP ratio, the authors find larger average fiscal adjustments than previous studies. Most consolidation episodes resulted in stabilisation of the debt-to-GDP ratio, but at a new, higher level.
Syriza and debt talks: Estimates from a Rubinstein bargain approach
Paolo Manasse (VoxEU) Feb 27, 2015
With the large Syriza victory in Greece, thoughts turn to forthcoming debt restructuring talks. This column argues that Greece is unlikely to get a large restructuring. Using a Rubinstein bargain approach to generate a back-of-the-envelope estimate, Greece would get some breathing room but not much. Rather than running a structural primary surplus of the order of 5% of potential output, as envisaged in the IMF projection, Greece could get away with a number close to 3.75%.
Credit supply and the housing boom
Alejandro Justiniano, Giorgio Primiceri and Andrea Tambalotti (VoxEU) Feb 27, 2015
There is no consensus among economists on the forces that drove the historical rise of US house prices and household debt that preceded the Global Crisis. In this column, the authors argue that the fundamental factor behind that boom was an increase in the supply of mortgage credit. This rise was brought about by the diffusion of securitisation and shadow banking, and by a surge in foreign capital inflows. The finding is based on a straightforward interpretation of four key macroeconomic developments between 2000 and 2006, provided by a simple general equilibrium model of housing and credit.
The Great Recession was not so Great
Jan van Ours (VoxEU) Feb 27, 2015
The Great Recession has been characterised by an unprecedented decline in GDP, and unemployment rates remain above pre-Great Recession levels in many countries. This column argues that economic growth is a ‘one size fits all’ solution for the problem of unemployment, because the unemployment rates of different kinds of workers are strongly correlated within countries. That said, economic growth affects above all the position of young workers, and so benefits mostly those who need it the most.
Reinvention is needed to secure the future of Big Oil
FT View Feb 28, 2015
Energy groups must learn to live with $50 crude or risk extinction.
Europe enters the age of disintegration
Wolfgang Münchau (FT) Feb 28, 2015
There will not necessarily be a formal break-up of the EU, but it will become less effective.
Brazil in a quagmire
Economist Feb 28, 2015
Government and investors have yet to face up to the scale of Brazil’s economic and political problems.
The Costs of Grexit
Jean Pisani-Ferry (Project Syndicate) Feb 28, 2015
From Greece's perspective, leaving the euro would be highly disruptive, which explains why there is very little support for it in the country. But there is very little agreement outside Greece about how a Grexit would affect the rest of the eurozone.
The Perilous Politics of the Euro
Andrés Velasco (Project Syndicate) Feb 28, 2015
The jury is still out on whether Greece will manage to avoid default, remain in the eurozone, and reverse the brutal contraction of its economy. But any fair panel already would have issued a verdict on the political consequences of the common currency: utter failure.
The Negative Way to Growth?
Nouriel Roubini (Project Syndicate) Feb 28, 2015
Monetary policy has become increasingly unconventional in the last six years, with central banks implementing zero-interest-rate policies, quantitative easing, credit easing, forward guidance, and unlimited exchange-rate intervention. But now we have come to the most unconventional policy tool of them all: negative nominal interest rates.
Europe’s Sovereignty Illusion
Javier Solana (Project Syndicate) Feb 28, 2015
The European Union has taken democratic integration – driven by the free will of its members, rather than military force – to unprecedented levels, securing its place at the forefront of institutional innovation. But today, sentiment in the EU seems to lean toward “conflict," rather than “cooperation."
The Deflation Bogeyman
Martin Feldstein (Project Syndicate) Feb 28, 2015
The world's major central banks are currently obsessed with the goal of raising their national inflation rates to their common target of 2% per year. But how justified is their fear that a negative demand shock could trigger a downward price spiral?
Labour market reforms and international imbalances
Giuseppe Bertola and Anna Lo Prete (VoxEU) Feb 28, 2015
The large international imbalances accumulated in the Eurozone have proven difficult to unwind during the recent Crisis. This column argues that market reforms had a role in generating current account imbalances, and that patterns of relative labour market regulation could be equally important in the aftermath of the Crisis.
Serfdom and Russian economic development
Andrei Markevich and Ekaterina Zhuravskaya (VoxEU) Feb 28, 2015
There is a debate among economists about the effects of serfdom on economic development. This column sheds light on this debate using novel dataset from 19th-century Russia. The findings indicate that serfdom was a crucial factor causing economic slowdown. The abolishment of serfdom was followed by a sharp increase in agricultural productivity, the living standards of peasants, and industrial development.
When negative rates become a zero sum game
FT View Feb 29, 2015
Stimulus policies should be structured in ways that boost demand.
EM flows: (almost) back in the black
Jonathan Wheatley (FT) Feb 29, 2015
Non-resident flows to EMs were roughly flat in February after seven months of outflows, says IIF
African IPOs ‘to hit six-year high’
Steve Johnson (FT) Feb 29, 2015
Egypt to lead rebound in flotations as economy stabilises.
China’s state-owned Zombie economy
Gabriel Wildau (FT) Feb 29, 2015
Reforming a sector burdened by debt and overcapacity is critical to restoring growth in the economy.