The short answer is: somewhat positive. The longer, but still broad-brush, answer starts from noting that two important documents have been issued in the last few days: the In-depth reviews following the so called AMR (Alert Mechanism Report) from the European Commission and the World Economic Outlook from the IMF. Read more
Bruegel blog
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What is the net of good and bad news from Brussels and Washington?
22nd April 2013
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New IMF growth forecasts: EU revised downward, once again
16th April 2013
The IMF published its new World Economic Outlook today (see the report here and the database here). Once again, euro-area’s outlook has been revised downward, but this is not the case for the USA and Japan. Read more
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China needs to set its services free
16th April 2013
China enjoyed a growth rate of more than 10 per cent from 2000 to 2010. But its economy is now in trouble. Read more
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Blogs review: Understanding the mechanics and economics of Bitcoins
10th April 2013
What’s at stake: The value of Bitcoins – the peer-to-peer currency – has been soaring so much of late that you have certainly heard about it. It is also likely that you still don’t fully understand how this decentralized payment mechanism works in practice as it is hard to build a bridge between the overly general and the overly complicated descriptions of the system. Here is our (imperfect) take at it based on what we have read so far. The monetary economics of it is fairly straightforward and uninteresting, but the mechanics of making payments over a communications channel without a trusted party is really interesting. Read more
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The Transatlantic Trade and Investment Initiative: Hope or Hype?
5th March 2013
The decision to launch negotiations on a bilateral free trade area between the EU and the US, called the Transatlantic Trade and Investment Partnership (TTIP) or EU-US free trade area is being hailed on both sides of the Atlantic as a historic development. Why have the EU and the US decided to undertake this “historic” project and at this point in time? Read more
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Blogs review: The Minimum Wage debate
4th March 2013
What’s at stake: In his State of the Union Address, US President Barack Obama resurrected a pledge to raise the minimum wage he had made during the 2008 campaign. In an effort to fight inequality, alleviate poverty and make work more attractive President Obama proposed proposed a $9 federal minimum wage, indexed to inflation. This has generated a lot of writings in the blogosphere, with the main issues revolving around the classic questions of the employment effect of the minimum wage as well as its efficacy as a means of redistribution. Read more
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Towards further liberalisation of the capital account in China
22nd February 2013
In China, discussions on capital account liberalisation have recently intensified. The Chinese government plans to gradually liberalise certain capital account items in the areas in which there is sufficient demand from the real economy and areas with relatively low investment risk, while maintaining tight regulation/supervision over the other items of the capital account and the financial sector. In response, Korean financial institutions need to establish strategies that will enable them to take part in this change, especially in the areas expected to undergo capital account liberalisation in the early stage. Read more
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Blogs review: The safe asset shortage
22nd February 2013
What’s at stake: Safe debts – or what is often called information insensitive assets, as they do not suffer from the types of financial frictions that are characteristic to other financial assets – play a major role in facilitating transactions for institutional investors. And, as we have learned in the recent years, they also play a major role in triggering financial crises when they loose their safety status and turn into information sensitive assets. As central bankers start backpedalling on their commitments to increase the supply of safe assets and start worrying about the negative effects of the “search for yield”, there has been a renewed discussion in the blogosphere about the role of safe assets and whether they remain in short supply. Read more
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The implications of the weakening Yen*
21st February 2013
The recent trend of the weakening Japanese yen reflects a major policy shift in Japan, following the formation of the government of prime minister Shinzo Abe. While the speed of yen depreciation has been rather fast, the depreciation has not yet even corrected the yen’s appreciation since the global financial crisis erupted. The new inflation target, two percent per year, is not extraordinary. Therefore, the talks about ‘currency wars’ are not justified. The desperate economic situation of Japan warranted a new policy approach, but there are concerns about the effectiveness of the new policy mix. In the coming quarters, both the euro and the Korean won are expected to appreciate, which could increase concerns that the exports of euro-area and Korean companies will be weakened. In particular, it will make it much more difficult for southern European countries to correct their external imbalances. Read more
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Basel III: Europe’s Interest Is to Comply
18th February 2013
On February 14, European Commissioner Michel Barnier and Federal Reserve Governor Daniel Tarullo indicated their agreement to quickly give the Basel III accord binding force over, respectively, European and American banks. This is welcome. But even more important than the exact timing of adoption is that it should stay true to what the accord actually stipulates. At this point, and contrary to many perceptions in Europe, this is likely to be the case of the US but not in the EU. Read more