The dark side of monetary expansions

In cooperation with Ignazio Angeloni After some short-lived optimism around end-summer (stock market recovered and spreads narrowed, suggesting light at the end of the tunnel), financial indicators have turned negative again. The prevailing sentiment is that the crisis will take a good deal of time to be resolved. In the meantime, confidence indicators in the […]

The Stability And Growth Pact Without the 3% Taboo

In response to some readers’ questions prompted by my post on “The New Stability and Growth Pact: A view from Italy”, I wish to provide a more detailed exemplification of my points that a) the SGP indicators are growth-sensitive, and b) there is a viable alternative to a fixed deficit/GDP ceiling for all. The premise, […]

Mr. Trichet goes to China

It cannot be much fun being the president of the European Central Bank these days. Or rather, it cannot be much fun being sent on missions abroad which are deemed to fail. These days Jean-Claude Trichet is in China, where he meets the top leaders of the country and tries to convince them to revalue […]

New Zealand Housing Boom Ends: Subprime Crisis Next?

During the past five years, a constellation of factors drove an unprecedented housing boom in New Zealand. The boom fizzled out this year but left behind a set of factors that raise the risk of housing sector weakness spreading to the rest of the economy. In some respects, New Zealand looks more vulnerable to a housing-led financial crisis than the U.S.: New Zealand (NZ) exhibits higher household indebtedness (debt to disposable income: 160% in NZ vs 131% in US, 2007) a larger current account deficit as a share of GDP (8% in NZ vs 6% in US, 2007), a higher share of housing in household assets (72% in NZ vs 39% in US*, June 2007), stronger house price inflation (median home price: US$266,964 in NZ vs US$238,000 in US, September 2007) and a higher benchmark interest rate (8.25% Overnight Cash Rate in NZ vs 4.50% Fed Funds Rate in US, November 2007) with a more justifiably hawkish central bank. This brief discusses the rise and fall of the New Zealand housing market, its outlook, and how the US crisis might throw the match that lights New Zealand’s financial tinderbox.

Measuring Progress

Progress is not only economic growth. Measuring progress requires taking people’s opinions seriously   This year marks the fourth consecutive year of rapid growth in Latin America. The average Latin American’s productivity is now 16% higher and purchasing capacity is 24% higher than four years ago. With currencies appreciating in most countries, purchases of automobiles […]

Differential minimum wages in Colombia?

We are coming close to the time when the increase in the Colombian minimum wage for 2008 is decided. Every year, the raise in the minimum wage is negotiated within the “Permanent Commission for the Negotiation of Wage and Labor Policies”. The negotiation is supposed to take into account inflation and productivity growth to set […]

Globalization and Inflation in the Brazilian Perspective

Since 2005 inflation expectation in Brazil is remarkably tamed. It is really great news, especially because of the country’s history of high inflation and heterodox plans. Not only inflation expectation is under control, but also its inertial component has faded away. Starting on September 2005, Brazil’s Central Bank has gradually decreased the interest rates in […]

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