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When all asset prices are too damn high.
Increases in stock prices over the last years combined with bond prices that remain high (yields are low) have raised the possibility of mispricing in assets, potential bubbles and future crashes. Are...
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The UK makes the Euro area look good.
A quick chart-of-the-day post motivated by some articles I was reading today about differences in country performances during the global financial crisis. Which economic policies worked best? How bad...
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Groundhog day (ECB).
For the last months the press conferences of Mario Draghi at the ECB have felt very repetitive. The argument has always been the same: inflation is below target and this might be a risk. But there is...
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The US labor market is not working.
In a recent post Paul Krugman looks at the dismal performance of US labor markets over the last decade. To make his point, he compares the employment to population ratio for all individuals aged 25-54...
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Is liquidity stuck at banks?
Last week the ECB announced new monetary policy actions to help restore growth in the Euro area and bring inflation closer to its 2% target. Interest rates were reduced and further provision of loans...
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Addicted to central bank painkillers?
Claudio Borio (BIS) and Piti Disyatat write about the dangers of low interest rates at VoxEU. Using an argument that has been put forward many times by the BIS (Claudio Borio and co-authors), low...
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A recession without a boom?
Simon Wren-Lewis in one of his latests posts dismisses the idea that the pre-recession UK economy was in an unsustainable debt-fueled boom. The argument, which I have made before in earlier posts, is...
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ECB needs to talk about slack and not structural reforms
In today's Financial Times, Matteo Renzi, Italy's primer minister defends the pace of Italian reforms. In doing so he responds to comments by Mario Draghi last week that the pace of structural reform...
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The September 2014 recession?
Here is a thought experiment: what if the US economy entered a recession next month? Would it be too early for a recessions? How would it compare to previous recessions? And what stories we would tell...
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Irrational exuberance meets secular stagnation
Robert Shiller warns us in the New York Times about the potential risks of high stock market valuations in the US. According to Shiller "the United States stock market looks very expensive right now"....
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Wage moderation: a recipe for growth?
In the economic policy debate in the Euro area it is common to hear a reference to the need for structural reforms in order to improve competitiveness, under the assumption that this is the recipe that...
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Whatever it takes to see helicopter Mario (Draghi)
Mario Draghi surprised markets last week with a further cut in interest rates and a QE plan to start purchases of assets to expand the ECB balance sheet. These two actions were welcome as well as the...
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The Euro crash?
As the US federal reserve might start soon raising interest rates and the ECB is about to being his quantitative easing plans, some see this divergence as a potential source of a large fall in the...
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ECB: QE or QT (Quantitative Tightening)?
Charles Wyplosz at VoxEU questions the potential effectiveness of quantitative easing (QE) as recently announced by the ECB. His main concern is that the ECB version of QE is supply driven, as opposed...
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Italian workers were too productive for 20 years
The 2008 crisis has resulted in significant downward revisions of potential growth for most advanced economies. As output collapsed we revised down our expectations of what is feasible in the...
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The permanent scars of fiscal consolidation
The effect that fiscal consolidation has on GDP growth has probably generated more controversy than any other economic debate since the start of the 2008 crisis. How large are fiscal multipliers? Can...
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Riksbank and ECB: reverse asymmetry
The Swedish central bank just lowered interest rates to zero because of deflation risks. This action comes after ignoring repeated warnings from Lars Svensson who had joined the bank in 2007 and later...
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The false rhetoric of (Euro) victims and offenders
Hans-Werner Sinn has written a new book with an analysis of the causes and potential solutions of the Euro crisis: "The Euro Trap: on Bursting Bubbles, Budgets and Beliefs". I have not read the book...
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German economic policy and chameleons
Wolfgang Munchau's FT article today is one of the most complete explanations I have seen about the origin and contradictions of the German economic orthodox dogma. The only issue that he does not...
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Macroprudential policy and distribution of risk
There is very little doubt that housing prices and leverage played a strong role in the global financial crisis that started in 2008. As the effects of the crisis disappear many countries still...
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