Mit ‘Peterson’ getaggte Artikel
Geschrieben von hkarner - 9. April 2013
Source: Project Syndicate
WASHINGTON, DC – While some observers argue that the key lesson of the eurozone’s baptism by fire is that greater fiscal and banking integration are needed to sustain the currency union, many economists pointed this out even before the euro’s introduction in 1999. The real lessons of the euro crisis lie elsewhere – and they are genuinely new and surprising.
The received wisdom about currency unions was that their optimality could be assessed on two grounds. First, were the regions to be united similar or dissimilar in terms of their economies’ vulnerability to external shocks? The more similar the regions, the more optimal the resulting currency area, because policy responses could be applied uniformly across its entire territory.
If economic structures were dissimilar, then the second criterion became critical: Were arrangements in place to adjust to asymmetric shocks? The two key arrangements that most economists emphasized were fiscal transfers, which could cushion shocks in badly affected regions, and labor mobility, which would allow workers from such regions to move to less affected ones. Den Rest des Beitrags lesen »
Veröffentlicht in Artikel | Getaggt mit: currency, Euro, Europe, Finanzkrise, Peterson, Project Syndicate, Subramanian | Kommentar schreiben »
Geschrieben von hkarner - 25. März 2013
Now we know at least which type of crisis it was (#3) hfk
Nicolas Véron, 25 March 2013, voxeu.
Senior Fellow, Bruegel; and Visiting Fellow, Peterson Institute for International Economics
The Monday morning Eurozone Cyprus bailout is now public, although details are scant. This column argues that this package cancels out some of the mistakes in last week’s package. Last week, the Troika should have vetoed the small-deposit tax and prepared a plan B for the Cypriot parliament’s rejection. Avoiding the risky scenario of a Cyprus exit will require further fiscal commitments from Eurozone partners. One possibility is a temporary, but EZ-wide, ‘deposit reinsurance’, or backing of national deposit-guarantee schemes by the ESM.
The late Mike Mussa1 noted that “there are three types of financial crises:
Veröffentlicht in Artikel | Getaggt mit: Banken, Cyprus, Euro, Europe, Finanzkrise, Peterson, Veron, voxeu | Kommentar schreiben »
Geschrieben von hkarner - 30. Oktober 2012
Senior Fellow, Bruegel; and Visiting Fellow, Peterson Institute for International Economics
Nicolas Véron, 29 October 2012, voxeu
Eurozone leaders are firmly committed to a banking union, at least on paper. But do Member States agree on the current proposals? And what do these proposals leave out? This column argues that a dangerous combination of disagreements between Member States over contentious issues and pitfalls in the design of new institutions may well ensnare the Eurozone along its faltering path towards recovery.
The leaders of Eurozone countries issued an unprecedented commitment on 29 June; the statement began, “[w]e affirm that it is imperative to break the vicious circle between banks and sovereigns” (Euro Area Leaders 2012). This statement officially acknowledged leaders’ intention to break the ‘doom loop’ of the mutually-reinforcing deterioration of credit conditions afflicting weaker member states such as Spain and the banks headquartered in them. Severing this feedback loop will require a transfer of vast parts of banking supervision and policy apparatus from national- to European-level in the form of a new banking union. This transfer is probably a prerequisite for maintaining the integrity of Europe’s monetary union in any crisis-resolution strategy. Of equal importance is that leaders’ failure to deliver on their pledge would severely impair investors’ already-damaged confidence in the ability of Eurozone governments to act collectively.
The action plan outlined in the June statement defines a sequence of two explicit steps.
- The ECB should first be endowed with broad supervisory powers and thus become the anchor of a ‘single supervisory mechanism’ for participating Member States.
- Once the single supervisory mechanism is deemed effective, the European Stability Mechanism (ESM) – the Eurozone’s newly-established intervention fund - would be able to recapitalise banks directly. Corresponding instruments are yet to be clarified, but would probably include common equity.
Veröffentlicht in Artikel | Getaggt mit: Banken, Banking Union, Bruegel, Euro, Europe, Finanzkrise, Peterson, Regulieren, voxeu | Kommentar schreiben »
Geschrieben von hkarner - 27. Oktober 2012
Research Analyst, Peterson Institute of International Economics
Senior Fellow at the Peterson Institute for International Economics and Senior Research Professor at Johns Hopkins University
Arvind Subramanian, Martin Kessler, 27 October 2012, voxeu
As China becomes ever more important in the global economy, will its currency take on an international role? This column argues that in some sense, this is already happening – an increasing number of emerging-market currencies seem to track (co-move with) the renminbi – and the trend is set to continue.
The staggering economic rise of China in the last three decades leads to the question of the potential internationalisation of its currency, the renminbi (RMB). Internationalisation has different dimensions. An international currency is widely used in financial and trade transactions, and crucially it is used as a store of value. Some, like Eichengreen (2011) and Frankel (2011) see a potential global role for the RMB, provided important ancillary reforms to the domestic financial system and to the financial account first take place. In Eclipse, one of us projected that such a shift might happen in less than two decades (Subramanian 2011).
But there is a third dimension to an international currency: it serves as a unit of account or as a reference point for other currencies. We define a reference currency as one which exhibits a high degree of co-movement with other currencies. This co-movement could reflect either pegging choices by the government or be driven by market forces. In a new paper (Subramanian and Kessler 2012), we measure the co-movements of the US dollar, the euro, the RMB and the Japanese yen for a sample of 52 emerging market economies. We do that by following a methodology first applied by Frankel and Wei (1994): running a regression of each emerging market currency exchange rate (against the Swiss franc – which plays the role of a neutral numeraire) on this basket of four currencies (also against the Swiss franc). The coefficients on each of the major currencies are called “comovement coefficients” (CMCs), and measure the extent to which exchange rates movements are correlated with the four benchmark currencies. Den Rest des Beitrags lesen »
Veröffentlicht in Artikel | Getaggt mit: china, currency, Peterson, Yuan | Kommentar schreiben »
Geschrieben von hkarner - 14. Oktober 2012
Jacob Funk Kirkegaard, Perterson Institute, 13 October 2012
Youth unemployment in the Eurozone looks like a social and economic disaster in the making – 30%, 40%, even 50% of young people sitting on their hands instead of building skills and experience. This column argues the headline numbers are misleading. While youth unemployment is a serious problem, a large share of EZ youth are not in the labour force, so the headline figures overstate the labour-market ‘scar tissue’ that will be left over from the crisis.
Hardly a day goes by without a reminder of youth unemployment rates in excess of 50% in Greece, Spain, Italy, and other parts of the European periphery. Sometimes the reminders are in the form of rants by economists or pundits about the moral deficiency of EZ demands for austerity and the risks of a lost generation of young people. The challenge for Europe’s youth is stark, and demands for government action are long overdue, especially in liberalising the insider biases that make it hard for outsiders to get jobs.
The situation is illustrated in Figure 1, which shows youth unemployment rates in the 15- to 24-year age group in the OECD countries in Q1 2011, compared with the latest available data1.
Figure 1. OECD Harmonised Youth Unemployment Rates, 15-24y
Source: OECD Labour Market Statistics.
The current OECD average is 16%, with the US average marginally higher at 16.8%, while the UK and the EZ average lies around 22%. Meanwhile, the intra-EZ range is remarkable, with Germany at just 8%, the lowest youth unemployment rate in the OECD, and Spain and Greece exceeding 50% in the latest data. Moreover, youth unemployment rates have increased in the last 18 months in the OECD, and in the four ‘Club Med’ EZ countries of Italy, Portugal, Spain and Greece. With these remarkable youth unemployment rates, it is striking how limited the social unrest has been. Den Rest des Beitrags lesen »
Veröffentlicht in Artikel | Getaggt mit: Europe, Finanzkrise, Kirkegard, Peterson, Unemployment, USA, Youth | Kommentar schreiben »
Geschrieben von hkarner - 10. Oktober 2012
Jacob Funk Kirkegaard, 8 October 2012, Peterson Institute
Political pressures are rising again in Europe. This column argues that reactions in parliaments, central banks and on the street are well within the bounds of predictable reactions to hard times. These developments change nothing of significance in the calculus concerning the eventual success of the Eurozone crisis response.
After a quiet few weeks, political pressures are rising again in Europe. Petrol bombs exploding in Athens and news reports of mounting support for the rightist Golden Dawn party bring into questions the durability of the summer stabilisation in the EZ.
Yet there is little to indicate that these developments change anything of significance in the EZ crisis response. Greek protesters invariably fight with police, but so what? The Greek government is likely to agree on a further austerity package, despite the violence and the first strike by (mostly) public sector workers since the new coalition government took office. As for Spain, the government in Madrid presented their fifth fiscal austerity and consolidation package last week, despite a few thousand protesters in Madrid. Den Rest des Beitrags lesen »
Veröffentlicht in Artikel | Getaggt mit: Europe, Finanzkrise, Kirkegard, Peterson, Riots | Kommentar schreiben »
Geschrieben von hkarner - 5. September 2012
Sovereign debt sustainability in Spain and Italy
William R. Cline, 30 August 2012, Peterson Institute
Interest rates on Italian and Spanish bonds are back up to their 2011 levels, raising alarm bells across Europe. But this column argues that the media’s hard-held belief that neither Italy nor Spain can withstand interest rates of 7% is wrong.
After a brief easing in sovereign interest rates for Italy and Spain following nearly €1 trillion in LTRO (long-term refinancing operation) lending to Eurozone banks by the ECB at the turn of the year, in the second quarter of 2012 these rates rebounded. As Spain in particular had to revise its fiscal target for the year and concern mounted about its banking cleanup costs, some influential economists escalated their concerns about a possible debt restructuring for Spain.1 Interest rates on ten-year bonds had fallen from peaks of 7.3% for Italy and 6.7% for Spain in late November 2011 to lows of 4.9% for both countries at the beginning of March 2012. By the third week in July, however, these rates had rebounded to 6.6% for Italy and 7.6% for Spain.2 Den Rest des Beitrags lesen »
Veröffentlicht in Artikel | Getaggt mit: Bonds, Euro, Europe, Finanzkrise, Greece, Interest, Italy, Peterson | Kommentar schreiben »
Geschrieben von hkarner - 2. September 2012
Anders Åslund,21 August 2012, voxeu
Senior fellow, Peterson Institute for International Economics and Adjunct Professor, Georgetown University
It has become increasingly fashionable to talk about Europe without the euro. But this column points out that in the last century Europe has seen the collapse of three multi-nation currency zones: the Habsburg Empire, the Soviet Union, and Yugoslavia – and they all ended with disastrous hyperinflation. The lesson for the Eurozone is clear: avoid break up at almost any cost.
Articles on a possible breakup of Eurozone either see it as a mere devaluation (Lachman 2010, Roubini 2011) or reckon that its collapse would amount to a major economic disaster (Buiter 2011, Cliffe et al. 2010, Normand and Sandilya 2011). It seems the latter is more likely. Large imbalances have accumulated between southern debtor countries and northern creditor countries. Any capping of these balances would disrupt the payments mechanism between the Eurozone countries and impede all economic activity (Åslund 2012).
In the last century, Europe saw the collapse of three multi-nation currency zones, the Habsburg Empire, the Soviet Union, and Yugoslavia. They all ended in major disasters with hyperinflation. In the Habsburg Empire, Austria and Hungary faced hyperinflation. Yugoslavia experienced hyperinflation twice. In the former Soviet Union, ten out of 15 republics had hyperinflation (e.g. Pasvolsky 1928, Dornbusch 1992, Pleskovic and Sachs 1994, and Åslund 1995). Den Rest des Beitrags lesen »
Veröffentlicht in Artikel | Getaggt mit: Aslund, Euro, Europe, Finanzkrise, Hyperinflation, Peterson, Sinn, Target, voxeu | Kommentar schreiben »
Geschrieben von hkarner - 23. Mai 2012
Author: Morris Goldstein · May 22nd, 2012 · RGE EconoMonitor, Peterson Institute
By all accounts, EU member countries have for months been debating how to implement the minimum bank capital standards agreed under Basel III. Their arguments have unfolded as the EU works to complete its fourth Capital Requirements Directive (CRD4) and its Capital Requirements Regulation (CRR); (see Véron 2012). Three issues have been contentious: (i) whether member countries should be permitted to enact minimum capital ratios considerably tougher (higher) than those specified under Basel III without approval of the EU: (ii) whether the restrictions on what can be counted as high-quality capital under Basel III should be scrupulously adhered to in EU legislation; and (iii) whether the Basel III deadlines for introducing an unweighted leverage requirement for bank capital and two new quantitative liquidity standards (the liquidity coverage ratio and the net stable funding ratio) should be mirrored in EU legislation.
Unfortunately, the decision of the finance ministers announced on May 15 reflected a compromise that set back the cause of reform, risking further instability for the banking system in Europe and the global economy generally. The European Parliament should demand significant changes before approving this very flawed measure.
It has been reported that in the debates, the United Kingdom, Sweden, and Spain, with the support of the European Central (ECB), favored a “yes” answer to all three of the questions cited above. For convenience, I call this position the Osborne View—named after perhaps its most ardent proponent, George Osborne, the UK Chancellor of the Exchequer. Another group of EU countries, reportedly led by Germany and France, with the support of the European Commission, opposed that position. I call this position the Schaeuble View (after Germany’s Minister of Finance, Wolfgang Schaeuble). Den Rest des Beitrags lesen »
Veröffentlicht in Artikel | Getaggt mit: Banken, Basel III, Europe, Peterson, Regulieren, RGE Monitor | Kommentar schreiben »
Geschrieben von hkarner - 1. März 2012
Author: Jacob Funk Kirkegaard · February 27th, 2012 · Peterson Institute
Just as it did when Congress recently extended the payroll tax cut, brinkmanship has produced a deal in Europe to extend a new lifeline to Greece and clear the way for the biggest sovereign bond restructuring in history. Both pieces of the agreement—the privately held Greek debt write-down of more than €100 billion and the terms of the new bailout extension—have produced widespread doubts in markets and among many analysts. Accordingly, a more detailed look at both is worthwhile, before considering how this package fits into the ongoing brinkmanship between the euro area and the International Monetary Fund (IMF) and the general focus on austerity in the euro area.
Part 1: The Greek PSI Deal
The agreement on the privately held debt write-down—known as Private Sector Involvement, or PSI—is no ordinary bond swap, but instead a remarkably complex transaction of unprecedented scale. The ultimate haircut accepted by the private creditors from the Institute for International Finance (IIF) went up to 53.5 percent of the principal bond value. Factoring in estimated average reduced coupon payments of new bonds of just 2.63 percent in the first eight years and 3.65 percent of the full 30-year period1, the ultimate net present value (NPV) loss for private creditors looks likely to approach 75 to 80 percent.
The new Greek bonds will be governed by English law, which means that the Greek government will not in the future be able to change the regulation of them. They will also be explicitly treated equally (pari passu) with new official sector loans from the European Financial Stability Facility (EFSF) as part of a co-financing assistance package to Greece. These sweeteners notwithstanding, it remains the case that private creditors face dramatic financial losses as a result of this bond swap. Den Rest des Beitrags lesen »
Veröffentlicht in Artikel | Getaggt mit: Banken, Greece, Kirkegard, Peterson, PSI, Restructuring, RGE Monitor | Kommentar schreiben »