The ECB and the Fed

By: Charles Wyplosz, Graduate Institute of International Studies

Facing different situations, the Fed and the ECB muddle through, each in its own way.

The case against a Grand Coalition in 2009

By: Wolfgang Münchau

Forget all this hogwash about the responsibility of the cenrtre. Grand coalitions are undemocratic.

Some thougths about the future of the euro

By: Susanne Mundschenk and Wolfgang Münchau

Forget Italy, or Spain. The real danger to the long-term sustainability of the euro are the continued ideological differences between France and Germany, which have widened since the start of the EMU in 1999.

Why is output volatility falling for the euro area?

By: Eurointelligence Publication Review

In the Quarterly Report on the Euro Area Vol 6, published this week, the European Commission had an interesting article on reduced volatility of output growth in the euro area. The argument is that compared to the USA, the euro area enjoyed less contributions from financial markets but from mproved macroeconomic management since its start in 1999. Their upbeat outlook is that the euro area will continue to enjoy low output volatility. We are more cautious about this.

The economic cost of rebalancing the global economy

By: Eurointelligence Publication Review

Global Imbalances: Time for Action, by Alan Ahearne, et al., Peterson Institute for International Economics, Policy Brief, March 2007.

A rebalancing of the global economy would require serious economic adjustments in all the large economies, in particular a realignment of the effective real exchange rates of the dollar, yen and renimnbi. This paper looks at how this can be achieved.

Why is credit risk priced so low? A new explanation

By: Eurointelligence Publication Reviews

Why Is Credit Risk Priced so Low? A Perspective on Global Liquidity, by Pierre Cailleteau and Aurélien Mali, Moody's International Policy Perspectives, February 2007

One of the great financial puzzles of our time is why credit risk is priced so cheaply. There are a number of theories around. But none of these theories appears capable of capturing all the pertinent aspects of this story.

Why the level of public debt matters after all

By: Susanne Mundschenk

Favero, C. and F. Giavazzi (Jan 2007): "Debt and the effects of fiscal policy", NBER working paper 12822.

Economists tend to agree more easily on the economic effects of monetary policy than fiscal policy. Depending on the model one uses fiscal policy could have opposite effects on consumption and real wages. Favero and Giavazzi's paper explains this puzzle in terms of the level of public debt.