- A banking union for the Eurozone.
- How the EU structures have to evolve with the Eurozone
- Anton Jevčák, European Commission
Did nominal exchange rate flexibility matter during the global recession? A Czech and Slovak case study
- Marco Buti and Nicolas Carnot, European Commission
The debate on fiscal policy in Europe: beyond the austerity myth. The EU defends its approach.
5. Price and Cost Competitiveness - 3rd quarter 2012 and link to data, http://ec.europa.eu/economy_finance/db_indicators/competitiveness/data_section_en.htm.
- Data on public opinion of the Euro. October 2012 attitudes for Euro-area countries. Seems like a lot of support in Greece still for example.
- Remarkably prescient and clear review of the optoins for Monetary Union from Charlie Bean,, Economic and Monetary Union in Europe. Clear statement of conditions for beneficial monetary union and the final conclusion, that fiscal policy will be too constrained, is very insightful.
- A typically elegant and well-explained piece on debt by Mankiw and Ball.
- A great piece by Simon Wren-Lewis on fiscal councils. To my view this is the key to the austerity argument. Any government can raise public spending, what's much harder is to cut it again. To those who say "we must use fiscal policy now, at the zero lower bound, with unemployed resources" they foget to then say "and when the economy has recovered we cut back on fiscal policy and use monetary policy". That means the argument is about not austerity but the timing of austerity. Do populations trust governments to cut back later? I think the expenses scandal, hacking etc. has left people in the UK suspicious of politicians. So trust has fallen. So an expansionary then contractionary fiscal policy is just not credible (without some institutional fix).
- Brad De Long on Olivier Blanchard on macro models
Olivier Blanchard: Suppose you are writing two textbooks, one undergrad, one grad. In the undergraduate textbook, it seems to me that when teaching the IS-LM, we have the same interest rate on the IS and the same interest rate on the LM. Basically, the policy rate that the central bank chooses by the LM curve goes into the IS curve when corrected for expected inflation. I think what we have learned is that these [two interest rates] can be incredibly different. So I would have an r and an rb, and have a machine in the middle--the banking system which would, depending on its health, determine the spread. It seems to me that if I want to communicate one message, that message is what I would communicate to undergrads.
I think De Long tries to write this type of model here and l here.
I like this as a way of understanding those who favour austerity. As De Long says, the austerity argument is right in the Greek case, where the non-credible promise of more spending simply raises spreads and so crowds-out any possible rise in government spending.