Business as usual in Frankfurt?

Apparently yes. The press release after the Governing Council (GC) decision to keep interest rates unchanged contains the usual clever account of the “economic and monetary developments in the euro area” the balance of which leads to the final decision. Following the usual two-handed style, we understand that: on the one hand “economic activity is […]

Stagflation strikes back

The main industrialized countries show clear signs of slowdown of economic activity and acceleration of inflation. In a word: stagflation. The first dramatic experience with stagflation on a global scale in the early 1970s changed profoundly common thinking about macroeconomic phenomena and policies. Today’s blueprints for policy makers have clear guidelines in the event of […]

Are we all Wicksellian now?

Hard times for the world economy bring hard times for the economic profession too. As noticed by Axel Leijonhufvud at the ouset of the ongoing financial crisis, “Abundant compliments and congratulations have been exchanged among academic economists and central bankers over the apparent successes of inflation targeting in recent years. Are these well deserved? Or […]

Again on the strong euro. Present costs vs. future benefits: Towards a World Euro Area?

In his post on March 24th http://www.roubini.com/euro-blog/2008/03/24/beware-of-false-arguments-the-strong-euro-will-hurt/, S. Dullien warns against “false arguments” about the effects of the strong euro: it will eventually hurt the German economy, let alone the other European economies. Dullien argues with the “no-problem” view put forward by the FT Deutschland “and other papers”. In a previous post, S. Guillou, S. […]

The threats of the strong euro: real and imagined

with S. Guillou (OFCE-DRIC, Nice, France), S. Schiavo (Dipartimento di Economia, Università di Trento, Italy.   The strong euro, so the story of columnists, politicians and businessmen goes, reduces the competitiveness of our firms as it increases the price paid by foreign customers to buy our goods. Euro-area (EA) firms are then harassed, hit, wounded, […]

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, […]

The new Stability and Growth Pact: A view from Italy

Italy is the right place in which to assess how the new Stability and Growth Pact (SGP) works. This new set of rules for the conduct of fiscal policy in the euro area was established in March 2005, when the Ecofin approved a revision of the earlier Pact after France, Germany and Italy in 2003 […]