What’s at stake: The members of the American Economic Association received on Wednesday an email signaling that – beginning July 1, 2012 – all submissions to AEA must be accompanied by a Disclosure Statement summarizing potential conflicts of interest. The AEA's move was partly motivated by the public attention the documentary "Inside Job", which outlined ethical lapses within the profession. Although the AEA has no authority to police economists, other journals will probably use the AEA's disclosure guidelines to formulate their own. And many economics departments and think tanks will likely establish rules that adhere to these guidelines. Read more
Bruegel blog
-
Ethical economists
25th May 2012
-
Blogs review: The Capital requirements directive (CRD4)
11th May 2012
What’s at stake: The last ECOFIN has been the occasion of a fierce negotiation over the adaptation into EU legislation of the Basel Committee rules known as Basel III. The Capital Requirements Directive proposal (CRD4) was proposed in July 2011 by the European Commission and is expected to enter into force in January 2013, with gradual implementation until completion in 2019. Yet no agreement was reached at the last ECOFIN where important divisions inside Europe have been exposed, and more work is still expected from the Basel Committee on a number of elements of the final proposal. This is at the heart of fundamental shifts within Europe’s banking sector and potential political conflicts primarily between the UK and continental Europe. Read more
-
Blogs review: the discounting debate in climate change mitigation
20th April 2012
What’s at stake: Decisions with respect to climate change action depend on various parameters, but a particularly important one is the choice of the social discount rate (SDR), which captures – among other things – the weight at which we discount the welfare of future generations. This discounting decision has direct implications as to whether it is necessary to delay or accelerate climate change mitigation policies. In discussions about the choice of the appropriate SDR, two main approaches have emerged: an a priori approach (as proposed by Stern) and a market based approach (as proposed by Nordhaus and Weitzman). Read more
-
Chart of the week: US and Europe’s employment recovery: The Missing Engines
12th April 2012
Dave Altig from the Atlanta Fed recently compared sectoral employment growth in the US during two recoveries: the 2001 dot-com recession and the 2007 financial crisis. The 45 degree line in the figure helps us understand the relationship between the two recoveries. If industries are aligned along the line, this means that the pace of employment growth was similar over the two periods. The drag of construction is rather expected and lags greatly behind the 2001/2007 upswing where it contributed greatly to employment growth. The very large drag of government jobs which are not only depressing overall employment but also GDP. Yet the most striking feature of the US recovery is the relatively good standing of manufacturing (ex motor and… Read more
-
Parliament Debates Capital Requirements
11th April 2012
On April 2, the European Systemic Risk Board (ESRB) published a letter by Mario Draghi, as Chair of the ESRB, to EU legislators. The letter focused on developing further the legal basis of the current proposals for the Capital Requirements Directive and Regulation. Martin Wolff takes up the topic of capital requirements in a recent post on England’s Financial Policy Committee. On the US side, Ben Bernake stated on Monday that increased capital requirements for banks could make loans more expensive for financial institutions. The Economic and Monetary Affairs Committee of the European Parliament is also debating the topic this Thursday (17 April). One of the key issues on the agenda will be the capital buffers put forward in a proposal for a directive.According to the… Read more
-
On the merits of fiscal devaluations
27th March 2012
Fiscal devaluations are at the heart of current debates about improving trade competitiveness in the eurozone. Gita Gopinath, Emmanuel Farhi and Oleg Itskhoki provided a strong model to assess the effects of such an enterprise. The idea of simulating a devaluation by means of taxation goes back to Keynes, who suggested using an import tariff combined with an export subsidy to raise the price of imports while reducing the foreign price of export goods. The use of an export subsidy was also recently suggested by Marzinotto, Pisani-Ferry and Wolff to kick start growth in Southern European economies. A new IMF paper by Ruud de Mooij and Michael Keen reviewed a number of such experiences and tries to put the theory… Read more
-
Actual and cosmetic changes in debt sustainability
15th March 2012
The leaked Debt Sustainability Analysis (DSA) produced by the IMF in February 2012 looked into the economic developments that would arise in Greece following two different scenarios, a baseline and an alternative scenario. A revised version of the DSA was leaked on March 11th, incorporating the recent agreement reached on Private Sector Involvement (PSI) and Official Sector Involvement (OSI). Read more
-
Inflation and expectations formation
2nd March 2012
Euro area inflation was lower than estimated in January, according to data released on Wednesday, February 29, by Eurostat. The statistical office reported a fall of 0.8 percent in consumer prices against December figures. The numbers reflect expectations about a slowdown in price growth. In a BIS working paper, Galati, Heemeijer and Moessner present new insights from a survey on euro area inflation expectations. They find that long-term expectations are in line with the ECB’s definition of price stability and that the Greek debt crisis had an impact on short- and medium-term inflation expectations, but only a modest effect on long-term outlooks. They also reveal that the survey participants tended to change their beliefs often. This frequency decreased the longer… Read more
-
Is a voluntary Greek debt exchange possible?
13th February 2012
The Greek austerity package was approved on Sunday February 13th, making it possible for Greece to receive the second EU-IMF bailout worth €130bn. The vote in favour of the package took place in the background of violent protests in central Athens. As the €14.5bn Greek bond payment on March 20th draws closer, the issue of the private sector accepting a voluntary 50 per cent reduction of the face value of their bonds is becoming more and more pressing. In a recent paper, Mitu Gulati (Duke University) and Jeromin Zettelmeyer (EBRD and CEPR) look into whether a voluntary Greek debt restructuring is possible. The authors argue that larger creditors may be more easily persuaded to accept a 50 per cent haircut… Read more
-
Deleveraging: Lessons from Japan
7th February 2012
In the late 1980s, Japan’s credit-fuelled asset bubble burst, leading to a long stagnation. The growth problem experienced by many developed economies at the moment is reminiscent of the Japenese episode. If one compares current GDP, inflation, property prices and interest rates to the ones recorded in Japan, strikingly similar patterns emerge. Some refer to the current period of weak growth as "Japanization." In a public lecture at the London School of Economics, Masaaki Shirakawa, Governor of the Bank of Japan, reflects on the Japenese experience, placing a special emphasis on the recovery in the background of deleveraging. In a working paper released today by Bruegel, Eric Ruscher and Guntram B. Wolff look into corporate balance sheet adjustment episodes in Japan… Read more