What’s at stake: There has been much ink spilt (except maybe in the eurozone) over the last few years about the need to move away or at least complement the flexible inflation-targeting framework so that central banks can create expectations of future expansionary policy in a liquidity trap without changing its long-run goals. One idea – Nominal GDP targeting – has gathered most attention. After qualifying the idea as “powerful” and raising expectations of a possible future adoption, the Bank of England governor-designate Mark Carney reversed course and said that he was “far from convinced” by the idea in front of the Treasury select committee yesterday. While he didn’t lay out precisely the intellectual reasons for that change of heart, we’ve tried to put together some of the reasons put forward against NGDP targeting. Read more
Bruegel blog
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Blogs review: The Monetary Regime and the drawbacks of NGDP targeting
8th February 2013
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Franco-German energy cooperation – from a joint declaration to measurable results
7th February 2013
At the celebrations of the 50th anniversary of the Elysée treaty the Franco-German Council of ministers issued a joint declaration on guidelines for future cooperation [link]. The document called, in the expectable diplomatic language, for a closer Franco-German cooperation in the energy sector. Read more
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Standard-setting abuse: the case for antitrust control
7th February 2013
The issue: Standards reduce production costs and increase the value of products to consumers. Think about mobile phones: using the same technology allows anybody who owns a mobile phone to call or be called by any other mobile phone owner. The bigger the network, the better for consumers. Read more
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SNS Reaal expropriation: Should Senior bondholders carry the burden on future bank resolutions?
6th February 2013
Last week the Dutch government announced the full expropriation of SNS Reaal, the 4th largest Dutch bank and decided to write-off shareholders and junior bondholders while senior bondholders where left untouched. Read more
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What does the Big Mac say about Euro Area adjustment?
6th February 2013
The Big Mac Index offers some quick insights into the state of currencies around the globe by comparing the price of Big Macs across countries. Of course, the Big Mac index was never intended as a precise gauge of currency misalignment, as the Economist has just reminded us in its latest update. According to them, it is just about making PPP and other difficult exchange rate concepts more digestible. Read more
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Distressed Europe should not be bribed to reform
6th February 2013
European leaders have started a discussion on German-inspired “contracts for competitiveness and growth”. To implement structural reforms in eurozone member states, the European Commission has proposed to negotiate with selected countries contracts underpinned by financial support. Read more
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The world innovation landscape: Asia rising?
5th February 2013
Global growth in research and development has been vigorous, with both public and private R&D investment increasing and growing more rapidly outside the previously dominant centres of North America, Europe and Japan. The counties with the largest R&D spends are the US, the UK, France, Germany, Japan, China and South Korea. These seven countries account for about 71 percent of worldwide R&D expenditure. Read more
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No ringfencing makes sense, but don't take off the gloves - implementing the recommendations in the Liikanen report
4th February 2013
Michel Barnier, European commissioner in charge of regulatory reform, has indicated implementation of the recommendations in the Liikanen report will stop short of ringfencing certain bank activities. The argument is that this could undermine fragile European growth outlook. This viewpoint makes sense. Read more
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The Euro Area: Great Recession or Great Depression?
4th February 2013
The Great Depression was a period of severe economic contraction that lasted many years. In the United States real GDP fell every year from 1929 to 1933, when it reached only 73 percent of its 1929 level. Starting in 1934 the recovery was quite rapid, with GDP reaching its 1929 level in 1936. By contrast the Great Recession has been much milder. Read more
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Is the Euro Crisis Over?
1st February 2013
Financial crises tend to start abruptly and end by surprise. Three years ago, the euro crisis began when Greece became a cause for concern among policymakers and a cause for excitement among money managers. Since the end of 2012, a sort of armistice has prevailed. Does that mean that the crisis is over? Read more