On 9 March 2015 the ECB began purchasing European sovereign and agency bonds and supranational debt securities under the Public Sector Purchase Programme (PSPP). Today, the ECB published its PSPP holdings and the corresponding weighted average remaining maturities for each member state and the supranational institutions after the first month of purchases. Read more
Bruegel blog
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ECB Quantitative Easing on track
7th April 2015
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Pessimistic views of China’s economy are unconvincing
7th April 2015
In late 2001, I first used the phrase BRIC to discuss the likely rise of Brazil, Russia, India and China as growing shares of the world economy and outlined a number of scenarios in which it seemed pretty inevitable that their share would rise sharply by the end of that decade. Read more
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Secular stagnation and capital flows
7th April 2015
What’s at stake: Former Chairman of the Federal Reserve and new blogger Ben Bernanke has generated many discussions this week by challenging the secular stagnation idea. Bernanke argues, in particular, that the stagnationists have failed to properly take into account how capital flows can mitigate or even eliminate the problems generated by secular stagnation at home. Read more
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Money growth in the euro area is speeding up
2nd April 2015
The recent release of monetary indicators by the ECB has shown a gradual acceleration of money growth in the euro area. The growth rate of the broadest monetary aggregate calculated by the ECB, M3, was 4 percent in February 2015 compared to February 2014. However, as the literature on aggregation-theoretic measurement of money argues (see eg here), the simple-sum measures of money (the ECB publishes such measures) are not suitable measures of monetary developments. This is because they simply add up various assets, which differ in the degree of their monetary and investment services. For example, cash and a two-year bank bond (which are both included in the ECB’s M3 aggregate) are quite different assets and are unlikely be perfect… Read more
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European banking supervisor should limit banks’ exposure to all eurozone governments, not just Greece
1st April 2015
The Single Supervisory Mechanism's decision to impose limits on Greek banks’ holdings of government debt has been criticised for putting undue pressure on the Greek government to come to terms with its official creditors. But it is an important step to increase Greek financial stability and the likelihood of Greece staying in the euro. The conditions are now perfect for the common supervisor to introduce exposure rules across the euro area, which would greatly increase the stability of monetary union. Read more
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The ‘pub economics’ of structural reforms
31st March 2015
After over 7 years of crisis, everybody – ranging from politicians to policy-makers, including the press – seems to know that structural reforms might well be beneficial for long-term growth, but have a dragging effect in the short-run. However, is this really the case? Read more
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Supply policies at the zero lower bound
30th March 2015
What’s at stake: While the benefits of structural reforms are largely undisputed in the long run, several authors consider that reducing mark-ups and labor costs is counterproductive in the short run as these policies reinforce current deflationary forces. In a previous issue of the blogs review, we explained why new Keynesian models predict that negative supply shocks are expansionary at the zero lower bound (ZLB). In this issue, we address this question in the context of the Great Recession (with structural reforms) and of the Great Depression (with NIRA-like policies). Read more
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The dollar surge
23rd March 2015
What’s at stake: The US dollar has gone through a very rapid appreciation over the past 6 months. While reduced form estimates are often presented to argue that this will create a drag on the US economy, it is difficult to reason from a price change and the net effect could be positive if the price change is mostly driven by expansionary monetary policy abroad. In emerging economies, currency mismatches remain despite the recent increase in local currency sovereign debt and may create significant risks. Read more
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A tale of floods and dams
19th March 2015
A lot of debate has recently focused on the management of the fiscal crisis in Greece and whether or not the speed of adjustment has been too fast or too slow (see for example Anders Aslund, Simon Wren-Lewis or this VoxEu piece by the German Sachverständigenrat. In this blog I want to focus instead on the pre-crisis management before turning to the crisis period. Read more
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The whys and hows of a single market for Europe
19th March 2015
Be it sluggish growth performance, high unemployment or an incomplete monetary union, completing the single market is often offered as a silver bullet to alleviate or solve most of the current problems of the EU. However, seldom is time taken to explain what the underlying mechanics of the single market are and how the latter is supposed to deliver all these positive effects for the EU. Read more
