In this article, we discuss the interaction between the Covid-19 vaccine rollout in EU member sta... more In this article, we discuss the interaction between the Covid-19 vaccine rollout in EU member states and the effective use of grants and soft loans from the EU pandemic recovery fund. With some of the national spending plans for the Recovery Fund still awaiting initial submission (Bulgaria), others pending the Commission’s endorsement (Poland, Hungary) or formal Council’s approval (Romania, Estonia), and various other national plans in their implementation stage, the next challenge for policymakers will be to ensure that the initial and subsequent tranches of EU funds are released as economies reopen. We claim that special attention ought to be paid to Central and Eastern Europe, where some countries are lagging in their vaccine rollout and/or the preparation for their use of the EU recovery funds. This is likely to be an important test for EU institutions in determining the stability and coherence of the European project as a whole.
This paper has three main objectives, namely to (a) propose a new framework that can support plac... more This paper has three main objectives, namely to (a) propose a new framework that can support placing countries along a core-periphery continuum (beyond the more common binary treatment as either core or periphery), (b) to construct a continuous dynamic theory-based measure (the first, to the best of our knowledge) illustrating the use of this framework for a set of European countries using yearly data from 1960 to 2015, and (c) provide a first preliminary assessment, based on endogenous Optimal Currency Area (OCA) theory, of the main potential explanatory factors of the dynamics of this measure over time and across countries. Our main finding is that this new measure allows us to identify sets of countries on the basis of not only its level but also in terms of its dynamic behaviour. Using the Phillips-Sul procedure, we show the emergence a newer set of core countries (composed by Austria, Belgium, Germany, France, Italy and Netherlands), a mixed set of countries (namely Denmark, Sw...
Eurozone core dynamics is key to find a way out of the current crisis, write Nauro Campos and Cor... more Eurozone core dynamics is key to find a way out of the current crisis, write Nauro Campos and Corrado Macchiarelli
Extended Abstract: Since January 2020, the world has been confronted with a shock of unprecedente... more Extended Abstract: Since January 2020, the world has been confronted with a shock of unprecedented nature: a supply shock, causing demand shortage triggered by the spread of coronavirus (COVID-19). The impact of such a serious global shock has been estimated to that of a deep and prolonged recession, the worst since the Great Depression. Markets and organisations are facing a large decline in industrial and economic activity, and uncertainty about the magnitude of the coronavirus-fueled contraction and the pace of the rebound. These disruptions have been aggravated by the contagion containment measures adopted in the UK since March. All these elements need to be examined in more detail, and quantified, amd relevant reliving policies need to be defined. Here, we aim to model both mechanisms and achieve two objectives: First, to quantify the full impact and transmission of the crisis. Second, to propose (through solid ex ante assessment) potential policy measures that can be taken to ...
Future UK-EU relations are about to be negotiated in Brussels. While there are signs of improveme... more Future UK-EU relations are about to be negotiated in Brussels. While there are signs of improvement in many important policy areas such as citizens' rights, the financial settlement, and the impact of Brexit on the island of Ireland, little progress has been made on the role of the City as the location of Europe's major clearing house, which is represented by the London Clearing House (LCH) and owned by the London Stock Exchange, write Corrado Macchiarelli (Brunel/LSE) and Mara Monti (LSE).
1 We would like to thank Jagjit Chadha and Paul Mortimer-Lee for helpful comments and Patricia Sa... more 1 We would like to thank Jagjit Chadha and Paul Mortimer-Lee for helpful comments and Patricia Sanchez Juanino for preparing the charts and the database underlying the forecast. The forecast was completed on 24 October 2021. Exchange rate, interest rate and equity price assumptions are based on information available to 14 October 2021. Unless otherwise specified, the source of all data reported in tables and figures is the NiGEM database and NIESR forecast baseline. All questions and comments related to the forecast and its underlying assumptions should be addressed to Iana Liadze (i.liadze@niesr.ac.uk). Overview
The ECB’s expanded asset purchase programme (EAPP) adds the purchase programme for public sector ... more The ECB’s expanded asset purchase programme (EAPP) adds the purchase programme for public sector securities to the existing private sector asset purchase programmes to address the risks of a too prolonged period of low inflation. It now consists of a covered bond purchase programme (CBPP3), asset- backed securities purchase programme (ABSPP) and public sector purchase programme (PSPP). However, as the transmission mechanisms of monetary policy remains characterized by long, variable and uncertain time lags, the impact of asset purchases on the real economy continues to be a matter of discussion as confirmed by the slow recovery in bank lending. Some economists even argue that the most effective transmission channel of unconventional monetary policy is the exchange rate. Against this backdrop, the note assesses the effectiveness of the ECB programme of asset purchases one year after its first implementation.
The role of household debt in the real activity has attracted considerable attention recently mos... more The role of household debt in the real activity has attracted considerable attention recently mostly in the light of the observed increases in property prices and the increase of household indebtedness prior to the 2008 bust in many countries. The relevant literature on housing points to a number of the mechanism being likely to trigger or amplify real estate cycles (including bubbles). We focus on the interaction between banks and real estate developments, in particular assessing the implications of changing property prices on consumption decisions. We build on a previously described framework to introduce a real estate sector, accounting in itself for an explicit balance sheet dimension for consumers. The model thus results in an economy where on the demand side a collateral constraint limits households ability to borrow against the value of real estate, and on the supply side loan supply is constrained by bank capital. This allows studying the interactions of these two limits by ...
The European Council will hold a video conference on the Covid-19 outbreak later today. Sebastian... more The European Council will hold a video conference on the Covid-19 outbreak later today. Sebastian Diessner, Erik Jones and Corrado Macchiarelli write that with European economies under unprecedented strain, it is now time for EU leaders to commit to doing whatever it takes to forestall the crisis.
The sovereign bond crisis which started in 2010 caused a major disruption in euro area financial ... more The sovereign bond crisis which started in 2010 caused a major disruption in euro area financial markets. The rise of credit risk led banks from the “core” of the euro area to stop lending to the euro-area “periphery”. Only the huge liquidity support by the ECB through its unconventional monetary policy measures alleviated divergent financing conditions across euro area Member States. But the fragmentation of euro-area financial markets has not disappeared, and financial fragmentation still continues to divide the euro area. This is the case despite progress on the European Banking Union project and the ECB’s (conventional and unconventional) monetary policy. Against this background, this note assesses the implications and risks stemming from persistent fragmentation of euro area financial markets for the transmission of monetary policy. Secondly, it discusses some of the policy options available (to the ECB) which may reduce this fragmentation.
In this article, we discuss the interaction between the Covid-19 vaccine rollout in EU member sta... more In this article, we discuss the interaction between the Covid-19 vaccine rollout in EU member states and the effective use of grants and soft loans from the EU pandemic recovery fund. With some of the national spending plans for the Recovery Fund still awaiting initial submission (Bulgaria), others pending the Commission’s endorsement (Poland, Hungary) or formal Council’s approval (Romania, Estonia), and various other national plans in their implementation stage, the next challenge for policymakers will be to ensure that the initial and subsequent tranches of EU funds are released as economies reopen. We claim that special attention ought to be paid to Central and Eastern Europe, where some countries are lagging in their vaccine rollout and/or the preparation for their use of the EU recovery funds. This is likely to be an important test for EU institutions in determining the stability and coherence of the European project as a whole.
This paper has three main objectives, namely to (a) propose a new framework that can support plac... more This paper has three main objectives, namely to (a) propose a new framework that can support placing countries along a core-periphery continuum (beyond the more common binary treatment as either core or periphery), (b) to construct a continuous dynamic theory-based measure (the first, to the best of our knowledge) illustrating the use of this framework for a set of European countries using yearly data from 1960 to 2015, and (c) provide a first preliminary assessment, based on endogenous Optimal Currency Area (OCA) theory, of the main potential explanatory factors of the dynamics of this measure over time and across countries. Our main finding is that this new measure allows us to identify sets of countries on the basis of not only its level but also in terms of its dynamic behaviour. Using the Phillips-Sul procedure, we show the emergence a newer set of core countries (composed by Austria, Belgium, Germany, France, Italy and Netherlands), a mixed set of countries (namely Denmark, Sw...
Eurozone core dynamics is key to find a way out of the current crisis, write Nauro Campos and Cor... more Eurozone core dynamics is key to find a way out of the current crisis, write Nauro Campos and Corrado Macchiarelli
Extended Abstract: Since January 2020, the world has been confronted with a shock of unprecedente... more Extended Abstract: Since January 2020, the world has been confronted with a shock of unprecedented nature: a supply shock, causing demand shortage triggered by the spread of coronavirus (COVID-19). The impact of such a serious global shock has been estimated to that of a deep and prolonged recession, the worst since the Great Depression. Markets and organisations are facing a large decline in industrial and economic activity, and uncertainty about the magnitude of the coronavirus-fueled contraction and the pace of the rebound. These disruptions have been aggravated by the contagion containment measures adopted in the UK since March. All these elements need to be examined in more detail, and quantified, amd relevant reliving policies need to be defined. Here, we aim to model both mechanisms and achieve two objectives: First, to quantify the full impact and transmission of the crisis. Second, to propose (through solid ex ante assessment) potential policy measures that can be taken to ...
Future UK-EU relations are about to be negotiated in Brussels. While there are signs of improveme... more Future UK-EU relations are about to be negotiated in Brussels. While there are signs of improvement in many important policy areas such as citizens' rights, the financial settlement, and the impact of Brexit on the island of Ireland, little progress has been made on the role of the City as the location of Europe's major clearing house, which is represented by the London Clearing House (LCH) and owned by the London Stock Exchange, write Corrado Macchiarelli (Brunel/LSE) and Mara Monti (LSE).
1 We would like to thank Jagjit Chadha and Paul Mortimer-Lee for helpful comments and Patricia Sa... more 1 We would like to thank Jagjit Chadha and Paul Mortimer-Lee for helpful comments and Patricia Sanchez Juanino for preparing the charts and the database underlying the forecast. The forecast was completed on 24 October 2021. Exchange rate, interest rate and equity price assumptions are based on information available to 14 October 2021. Unless otherwise specified, the source of all data reported in tables and figures is the NiGEM database and NIESR forecast baseline. All questions and comments related to the forecast and its underlying assumptions should be addressed to Iana Liadze (i.liadze@niesr.ac.uk). Overview
The ECB’s expanded asset purchase programme (EAPP) adds the purchase programme for public sector ... more The ECB’s expanded asset purchase programme (EAPP) adds the purchase programme for public sector securities to the existing private sector asset purchase programmes to address the risks of a too prolonged period of low inflation. It now consists of a covered bond purchase programme (CBPP3), asset- backed securities purchase programme (ABSPP) and public sector purchase programme (PSPP). However, as the transmission mechanisms of monetary policy remains characterized by long, variable and uncertain time lags, the impact of asset purchases on the real economy continues to be a matter of discussion as confirmed by the slow recovery in bank lending. Some economists even argue that the most effective transmission channel of unconventional monetary policy is the exchange rate. Against this backdrop, the note assesses the effectiveness of the ECB programme of asset purchases one year after its first implementation.
The role of household debt in the real activity has attracted considerable attention recently mos... more The role of household debt in the real activity has attracted considerable attention recently mostly in the light of the observed increases in property prices and the increase of household indebtedness prior to the 2008 bust in many countries. The relevant literature on housing points to a number of the mechanism being likely to trigger or amplify real estate cycles (including bubbles). We focus on the interaction between banks and real estate developments, in particular assessing the implications of changing property prices on consumption decisions. We build on a previously described framework to introduce a real estate sector, accounting in itself for an explicit balance sheet dimension for consumers. The model thus results in an economy where on the demand side a collateral constraint limits households ability to borrow against the value of real estate, and on the supply side loan supply is constrained by bank capital. This allows studying the interactions of these two limits by ...
The European Council will hold a video conference on the Covid-19 outbreak later today. Sebastian... more The European Council will hold a video conference on the Covid-19 outbreak later today. Sebastian Diessner, Erik Jones and Corrado Macchiarelli write that with European economies under unprecedented strain, it is now time for EU leaders to commit to doing whatever it takes to forestall the crisis.
The sovereign bond crisis which started in 2010 caused a major disruption in euro area financial ... more The sovereign bond crisis which started in 2010 caused a major disruption in euro area financial markets. The rise of credit risk led banks from the “core” of the euro area to stop lending to the euro-area “periphery”. Only the huge liquidity support by the ECB through its unconventional monetary policy measures alleviated divergent financing conditions across euro area Member States. But the fragmentation of euro-area financial markets has not disappeared, and financial fragmentation still continues to divide the euro area. This is the case despite progress on the European Banking Union project and the ECB’s (conventional and unconventional) monetary policy. Against this background, this note assesses the implications and risks stemming from persistent fragmentation of euro area financial markets for the transmission of monetary policy. Secondly, it discusses some of the policy options available (to the ECB) which may reduce this fragmentation.
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