Zsolt Darvas

Tackling inflation: learning from the European Central Bank's six lapses

While mistakes unduly constrained rate hikes, gradual tightening is the right approach along with a new instrument to address energy bottlenecks.

The ECB’s monetary tightening: a belated start under uncertainty

A paper assessing the ECB policy errors that occurred in the last year, and the appropriateness of the current monetary policy stance of the ECB.

Real effective exchange rates for 178 countries: a new database

Russia’s huge trade surplus is not a sign of economic strength

Russia has recorded a record trade surplus, but more than half of its increase is due to the collapse of imports.

Legal options for a green golden rule in the European Union’s fiscal framework

The implications for public debt of high inflation and monetary tightening

Expected increases in interest rates and reductions in real GDP growth rates will result in relatively small increases in public debt-to-GDP ratios.

Discretion lets Croatia in but leaves Bulgaria out of the euro area in 2023

Crucial decisions about whether a country can join the euro area depend on questionable discretionary decisions.

Global and regional Gini coefficients

European Union countries’ recovery and resilience plans

Technology, trade, work councils and income distribution: new insights from MICROPROD

Bold European Union action is needed to support Ukrainian refugees

Hosting Ukrainian refugees could cost European Union countries in excess of €40 billion this year. A dedicated EU fund is needed to manage the burden.

Close cooperation for bank supervision: The cases of Bulgaria and Croatia

In-depth analysis on the banking supervision cooperation in Bulgaria and Croatia prepared for the European Parliament's Committee on Economic and Mone

How to reconcile increased green public investment needs with fiscal consolidation

The EU’s ambitious emissions reduction targets will require a major increase in green investments. This column considers options for increasing public

How has growth changed what countries get from the European recovery fund?

Adjustments to growth forecasts mean some countries will get 10% more than expected and others 20% less in grants from the EU Recovery and Resilience

Secular stagnation in today's economy. How can it be addressed?

Latvia's move to join the euro is right for the country

The puzzle of European Union recovery plan assessments

Identical European Commission assessments that EU countries’ recovery plan cost justifications are ‘medium-quality’ undermine trust in the assessments

A European climate fund or a green golden rule: not as different as they seem

Spending and borrowing via a non-redistributive EU climate fund or under a well-designed green golden rule would result in similar project implementat

Timely measurement of real effective exchange rates

This paper contributes to the measurement of monthly consumer price index-based real effective exchange rates with two main novelties.

Including home-ownership costs in the inflation indicator is not just a technical issue

The ECB’s preferred method to include owner-occupied housing services in the inflation indicator would involve an asset price.

The New Euro Area Inflation Indicator and Target: The Right Reset?

Testimony to the Monetary Dialogue Preparatory Meeting of the European Parliament's Committee on Economic and Monetary Affairs (ECON).

The new euro area inflation indicator and target: the right reset?

In-depth analysis on the European Central Bank's revised inflation target prepared for the European Parliament's Committee on Economic and Monetary Af

An overview of the Recovery and Resilience Plans

Testimony before the European Parliament’s Committee for Budgetary Control (CONT) on the topic "Capacity for proper expenditure controls of the increa

New life for an old framework: redesigning the European Union's expenditure and golden fiscal rules

This briefing paper focuses on two aspects of the EU fiscal framework: whether an expenditure rule would be more reliable than a structural budget bal

A green fiscal pact: climate investment in times of budget consolidation

Increasing green public investment while consolidating deficits will be a central challenge of this decade. A green fiscal pact would address this ten

Will European Union recovery spending be enough to fill digital investment gaps?

The recovery facility will boost digital transformation, but questions remain whether it will be sufficient to achieve Europe’s digital ambitions.

The great COVID-19 divergence: managing a sustainable and equitable recovery in the European Union

Policymakers must act to prevent lasting divergence within the EU and to prevent scarring from the fallout from the pandemic.

Setting Europe’s economic recovery in motion: a first look at national plans

Plans for spending European Union recovery funds submitted by the four largest EU countries reflect rather different priorities. So far, only Italy is

Wealth distribution and social mobility

This report explores the distribution of household wealth in the EU Member States and analyses the role of wealth in social mobility.

The unequal inequality impact of the COVID-19 pandemic

Less-educated workers have suffered most from job losses in the COVID-19 pandemic, and it is quite likely there was a significant increase in European

The EU’s fiscal stance, its recovery fund, and how they relate to the fiscal rules

Joint EU borrowing to boost the recovery, if not treated as national deficit and debt, will substantially ease rules-based fiscal adjustment needs in

European Union cohesion project characteristics and regional economic growth

A new approach, which estimates 'unexplained economic growth', provides insights into the types of European Union cohesion projects that produce bette

The nonsense of Next Generation EU net balance calculations

Estimates of payments countries will receive from the Next Generation EU instrument can be made with some degree of precision. But estimating countrie

When the future changes the past: fiscal indicator revisions

The 2020 pandemic economic shock has led to reassessment of fiscal policy measures in 2018 and earlier, because of faulty measurement of unobserved ou

COVID-19 has widened the income gap in Europe

Workers with low-educational levels suffered far worse than others in terms of COVID-19 related job losses during the first half of 2020 in the EU. Jo

Euro area accession countries in the context of the pandemic

Testimony before the European Parliament on the subject of euro area accession.

New life for an old framework: redesigning the European Union's expenditure and golden fiscal rules

Testimony before the European Parliament on the subject of EU fiscal policies.

Next Generation EU payments across countries and years

How much cake does everyone actually get and at what speed? This blogpost estimates the yearly Next Generation EU (NGEU) payments to each EU country a

Why is it so hard to reach the EU’s poverty target?

Why is it so hard to reach the Europe 2020 ‘poverty’ target? What does the poverty indicator actually measure? Why was the Lisbon strategy goal of tac

EU funds for migration, asylum and integration policies

This study provides an overview, analysis and evaluation of how EU funds for migration, asylum and integration policies have been used. Using publicly

The EU’s Multiannual Financial Framework and some implications for CESEE countries

Bruegel scholars Zsolt Darvas and Guntram Wolff contributed to the September 2018 edition of the OeNB's Focus on European Economic Integration.

Global interpersonal income inequality decline: The role of China and India

Without China and India, global interpersonal income inequality in 143 countries was higher in 2015 than in 1988. Has the rest of the world really bec

The economic growth and income distribution implications of public spending and tax decisions

European Union countries can reduce inequality of opportunity through public spending and tax decisions. Broadly, the most effective approach includes

Will European Union countries be able to absorb and spend well the bloc’s recovery funding?

To help finance the post-coronavirus recovery, the European Union is raising large amounts to pass on to its members. But absorption of EU funds is ty

Relocating production from China to Central Europe? Not so fast!

Western European imports from central Europe have fallen dramatically, while imports from China fell much less, and had already recovered to pre-COVID

Having the cake, but slicing it differently: how is the grand EU recovery fund allocated?

The European Commission’s original allocation mechanism really favoured lower-income countries and to a large extent was based on pre-COVID economic d

The EU’s recovery fund proposals: crisis relief with massive redistribution

Poorer European Union countries and those hardest hit economically by the COVID-19 crisis could obtain up to 15% of their GNI in grants and guarantees

Three-quarters of Next Generation EU payments will have to wait until 2023

Because of hurdles in designing, approving and implementing European Union programmes, less than a quarter of the €438 billion in grants planned under

An uncompromising budget

Apart from decisive European Central Bank measures, the EU-wide response to the COVID crisis had been rather weak until the Commission put on the tabl

Forecasting exchange rates of major currencies with long maturity forward rates

This paper presents unprecedented exchange rate forecasting results based upon a new model which approximates the gap between the fundamental equilibr

The fiscal consequences of the pandemic

The likely economic depression triggered by coronavirus will pose a serious fiscal challenge to some euro-area countries. Given the special circumstan

The EU’s poverty reduction efforts should not aim at the wrong target

The EU cannot meet its ‘poverty’ targets, because the main indicator used to measure poverty actually measures income inequality. The use of the wrong

Recent euro-area house price increases are dissimilar to earlier housing booms

Current housing markets relative to those pre-crisis seem to be far less driven by mortgage credit, and the size of the construction sector has not in

From climate change to cyber attacks: Incipient financial-stability risks for the euro area

The European Central Bank’s November 2019 Financial Stability Review highlighted the risks to growth in an environment of global uncertainty. On the w

Resisting deglobalisation: the case of Europe

Trade and finance expanded in Europe after the financial crisis, while public support for globalisation is on the rise, supported by low unemployment.

How could net balances change in the next EU budget?

The gap between payments into the EU budget and EU spending in a particular country has importance when EU spending does not constitute European publi

How much will the UK contribute to the next seven-year EU budget?

This post estimates the United Kingdom’s net contribution to the 2021-2027 EU multiannual budget at close to €20 billion, taking into account the most

A new look at net balances in the European Union's next multiannual budget

Whenever the European Union’s budget is discussed, much of the political focus is on net balances – whether countries pay in more than they receive –

Who pays for the EU budget rebates and why?

A complex system of EU budget revenue corrections has been developed since the mid-1980s. I quantify their impacts: which countries pay and benefit fr

Cross-border, but not national, EU interregional development projects are associated with higher growth

Our calculations reveal that places where EU regional development projects bind together participants from different countries experience higher econo

With or without you: are central European countries ready for the euro?

The debate on euro adoption by central European EU countries has intensified in the last years. In this Policy Contribution the author does not review

Long term real interest rates fell below zero in all euro area countries

The 10-year real government bond yield, which is the nominal yield deflated by expected inflation, has fallen below zero in Italy and Greece, boosted

Why structural balances should be scrapped from EU fiscal rules

A prominent team from DG ECFIN of the European Commission challenged some of the criticisms of the EU’s methodology for estimating potential output an

Simple Rules for Better Fiscal Policies in Europe

Proposals to reform the euro area are on the agenda again. An overhaul of the complex set of European fiscal rules should be top priority on this agen

Questions to the economy commissioner-designates

European Commission President-elect Ursula von der Leyen disseminated her mission letters to commissioner-designates. In my opinion, the letters to ec

Uncertainty over output gap and structural-balance estimates remains elevated

The EU fiscal framework strongly relies on the structural budget balance indicator, which aims to measure the ‘underlying’ position of the budget. But

Effectiveness of cohesion policy: learning from the project characteristics that produce the best results

This study by Zsolt Darvas, Antoine Mathieu Collin, Jan Mazza, and Catarina Midões analyses the characteristics of cohesion policy projects that can c

A European atlas of economic success and failure

Economic growth was diverse across EU regions, yet it is crucial to control for region-specific factors in assessing growth performance. We find that

How to improve European Union cohesion policy for the next decade

This policy contribution investigates the performance of the design, implementation and effectiveness of cohesion policy, the most evaluated EU tool f

EU enlargement 15th anniversary: Upward steps on the income ladder

Since their accession to the EU 15 years ago, the incomes of most central Europeans have increased faster than the incomes of longer-standing members

Effectiveness of cohesion policy: Learning from the project characteristics that produce the best results

Testimony at the Committee on Budgetary Control of the European Parliament.

EU budget implications of a no-deal Brexit

A no-deal Brexit would mean the UK’s contributions to the EU budget fall to zero as of March 30th 2019. The author here calculates an estimate of the

Greece: What to expect after the bail-out

After being under the close scrutiny of three financial assistance programmes since May 2010, Greece has finally left the bail-out in August 2018. How

Forecast errors and monetary policy normalisation in the euro area

What did we learn from the recent monetary policy normalisation experiences of Sweden, the United States and the United Kingdom? Zsolt Darvas consider

ECB’s huge forecasting errors undermine credibility of current forecasts

In the past five years ECB forecasts have proven to be systematically incorrect: core inflation remained broadly stable at 1% despite the stubbornly p

Reconciling contradictory forces: financial inclusion of refugees and know-your-customer regulations

The authors contributed to the new issue of the 'Journal of Banking Regulation' with a paper on financial inclusion initiatives and banking regulation

European fiscal rules require a major overhaul

In this Policy Contribution prepared for the French Conseil d’Analyse Économique, the authors assess current European fiscal rules and propose a major

Excess liquidity and bank lending risks in the euro area

In this Policy Contribution prepared for the European Parliament’s Committee on Economic and Monetary Affairs (ECON) as an input to the Monetary Dialo

The economic case for an expenditure rule in Europe

Proposals for reforming the euro area back on the agenda. An overhaul of the European fiscal rules should be on high on this agenda, because the curre

Should central European EU members join the euro zone?

Eurozone membership (or the use of a fixed exchange rate) was not a factor determining economic success in Central Europe. There were both good and ba

The macroeconomic implications of healthcare

Health-care systems play a crucial role in supporting human health. They also have major macroeconomic implications, an aspect that is not always prop

The troika and financial assistance in the euro area

The mismatch between euro-area and country-specific recommendations

Eurozone adjustment - economic growth & fiscal sustainability

The role of independent expertise in legislative process

Testimony before the European Parliament Committee on the Internal Market and Consumer Protection (IMCO).

EU income inequality decline: Views from an income shares perspective

Over the past decade, the income share of low earners has increased in the EU while that of top earners has slightly declined. Although the upward con

The Commission’s proposal for the next MFF: A glass half-full

The Commission’s proposal for the next Multiannual Financial Framework provides a good basis for subsequent negotiations and includes a number of bold

Beyond border control, migrant integration policies must be revived

Border control and burden-sharing of refugees is just one aspect of immigration policies. Greater financial inclusion and the tailoring of regulations

How large is the proposed decline in EU agricultural and cohesion spending?

Cohesion spending is proposed by the Commission to increase by 6% in the next MFF, but inflation is expected to reduce the real value of such spending

European income inequality begins to fall once again

Following almost a decade of relative stability, income inequality within the EU recorded a sizeable decline in 2016, reaching its lowest value since

Global income inequality is declining – largely thanks to China and India

Income inequality among citizens of 146 continues to fall, though at a somewhat reduced pace, according to the updated Bruegel dataset. Income conver

Greece must capitalise on its growth momentum

Better-than-expected growth performance reflects the underlying positive changes in the Greek economy – but net investment is in fact negative, while

Rethinking the European Union’s post-Brexit budget priorities

There will be a €94 billion Brexit-related hole in the EU budget for 2021-27 if business continues as before and the United Kingdom does not contribut

Post-Brexit migration policy

On 27 February 2018 Zsolt Darvas testified at the Home Affairs Committee of the House of Commons. This inquiry explores the potential trade-offs betwe

What is the financial balance of EU membership for central Europe?

EU membership led to major financial and economic advantages to central European Member States, partly by encouraging foreign investment. Widespread f

The ever-rising labour shortages in Europe

Historically high labour shortages in most central-eastern and north-western EU countries suggest that the immigration of central Europeans to north-w

People on the move: migration and mobility in the European Union

Migration is one of the most divisive policy topics in today’s Europe. In this publication, the authors assess the immigration challenge that the EU f

Optimistic UK business confidence indicators predict smooth Brexit

UK business confidence indicators hardly fell after the Brexit vote in 2016 and have been increasing steadily since. The most likely reason is an expe

The challenge of fostering financial inclusion of refugees

Creation of a European identification for refugees and a pan-European registry would encourage better financial inclusion, along with clear guidelines

Support for intra-EU mobility of people is on the rise

Europeans’ enthusiasm for immigration from other EU countries is steadily increasing –two-thirds of the EU population, on average, now support it.