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Silvia Merler

Silvia Merler

Silvia Merler, an Italian citizen, joined Bruegel as Affiliate Fellow at Bruegel in August 2013. Her main research interests include international macro and financial economics, central banking and EU institutions and policy making.

Articles by Silvia Merler

Italian banks: not quiet on the eastern front

22 days ago

Italian banks are back in the spotlight. After MPS failed to raise enough capital from private investors earlier this year, Banco Popolare di Vicenza (BPVI) and Veneto Banca take centre stage. The story of these two banks epitomises the strategy of delayed reform that has been so characteristic of the Italian banking crisis.

Italian banks are back in the spotlight. After MPS failed to raise enough capital from private investors earlier this year, the centre stage has moved from Tuscany to the region of Veneto, in the Italian north-east. We have met the main characters previously: Banco Popolare di Vicenza (BPVI) and Veneto Banca were among the Italian banks that failed the ECB’s comprehensive assessment in 2014. They were also in the spotlight last year, when the bank-funded

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The American opioid epidemics

27 days ago

What’s at stake: The US Department of Health and Human Services (HHS) declares that the country is “in the midst of an unprecedented opioid epidemic”. Since 1999, the rate of overdose deaths involving opioids – including prescription pain relievers and heroin – nearly quadrupled. We review contributions looking at the economic drivers and implications of this phenomenon.

The opioid epidemics
According to the Centers for Disease Control and Prevention, 91 Americans die every day from an opioid overdose. From 2000 to 2015, more than half a million people died from drug overdoses. Overdoses from prescription opioids are a driving force: since 1999, the amount of prescription opioids sold in the U.S. nearly quadrupled, and deaths from prescription opioids – drugs like oxycodone,

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The inflation basket case

March 17, 2017

Inflation in the euro area has finally reached 2%. But Draghi is right to warn that the underlying dynamics do not point to this being a self-sustaining trend. Breaking down the numbers shows that many inflation basket items are still showing weak price growth or even deflation.

Last week, the European Central Bank left interest rates and its quantitative easing programme unchanged. The decision came as February’s inflation for the euro area reached 2% for the first time since 2013, with German inflation slightly above that level.
ECB President Draghi highlighted that there are no signs yet of a convincing upward trend in underlying inflation. Indeed, this stands out clearly if we look more in detail at the composition of the basket. Figure 1 shows the headline and core inflation

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Taxing robots?

March 13, 2017

What’s at stake: “More human than human”, was the motto guiding the Tyrell Corporation’s engineering of biorobotic androids, in 1982’s Blade Runner. Fast forward to 2016, and Bill Gates argues that if robots perform human work, they should be taxed like humans. We review what economists think about this idea.

In a recent interview, Bill Gates discussed the option of a tax on robots. He argued that if today human workers’ income is taxed, and then a robot comes in to do the same thing, it seems logical to think that we would tax the robot at a similar level. While the form of such taxation is not entirely clear, Gates suggested that some of it could come from the profits that are generated by the labor-saving efficiency there, and some could come directly in some type of a robot tax.

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European identity and the economic crisis

March 6, 2017

What’s at stake: the EU prepares to mark the 60th anniversary of the Treaty of Rome, and the European Commission has presented a white paper “on the future of Europe”. However, some have argued that Europe is going through a serious identity crisis, whose roots are to be found in the economic crisis and whose implications could challenge further steps towards integration. We review the recent contributions to this debate.

Ferrera looks into what it means to be a European, and argues that integration proceeded so as to favour the emergence of a pan-European elite identity, while the inherited weight and inertia of national cultural frameworks prevented the emergence of a deeper sense of common citizenship across the EU. The ‘econo-cracy’ and austerity politics of the recent crisis

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Should we worry about Greek banks?

February 23, 2017

Earlier this month, the IMF and the European institutions clashed over conditions for sustainability of the Greek debt. One of the main disagreements seems to be the evaluation of the Greek banks’ health. Whose assessment should be trusted and are there reasons to worry?

Observers of the euro area crisis are accustomed to the fact that Greece periodically returns to centre stage. And when this happens, it is usually accompanied by a revival of the disagreement between the IMF and the European institutions. This happened earlier this month, as the two sides clashed over conditions for sustainability of the Greek debt and one of the main disagreements seems to lie in the evaluation of the Greek banks’ health.
The banks have undergone three rounds of recapitalisation since 2010 – the

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Big data and first-degree price discrimination

February 20, 2017

What’s at stake: first-degree price discrimination – or person-specific pricing, had until recently been considered a theoretical case with unlikely real-world application. Yet the increasing availability of big data could make this possible. We review recent contributions on this issue.

Shiller (2014) looks at the issue of first-degree price discrimination with big data, in the context of Netflix subscription. He shows that demographics which could have been used in the past to personalize prices, poorly predict which consumers subscribe. By contrast, modern web-browsing data, with variables which reflect behavior – such as visits to Amazon.com and internet use – do substantially better in predicting consumer subscriptions. He then presents a model to estimate demand for Netflix

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Is Germany a currency manipulator?

February 6, 2017

What’s at stake: the Financial Times reports that Peter Navarro, head of the US’s National Trade Council, has accused Germany of currency manipulation. He claims that the country uses a ‘grossly undervalued’ Euro to ‘exploit’ its trading partners. Angela Merkel replied that the Euro is managed by the European Central Bank, on which Germany does not exert influence. We review what the economic blogosphere thinks of this.

Paul Krugman argues that Navarro is right and wrong at the same time. Germany in effect has an undervalued currency relative to what it would have without the euro, against its neighbors. This is the result of a large real depreciation during the euro’s good years, which has only been partly reversed, because wages are downward sticky, and Germany has refused to

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Climate change and financial markets

January 30, 2017

What’s at stake: Ever since the 2016 Paris Agreement to reduce emissions was signed, researchers have been looking at the impact that moves towards a low-carbon economy might have on financial markets and financial stability. We review these contributions here.  In February 2016, the ESRB published a report estimating the impact of a transition to […]

What’s at stake: Ever since the 2016 Paris Agreement to reduce emissions was signed, researchers have been looking at the impact that moves towards a low-carbon economy might have on financial markets and financial stability. We review these contributions here. 
In February 2016, the ESRB published a report estimating the impact of a transition to clean energy on financial markets. Keeping global warming below 2°C  – as agreed in Paris

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Tariffs and the American poor

January 23, 2017
Tariffs and the American poor

What’s at stake: much has been said and debated — during the US election and beyond — about the distributional impact of free trade on the disadvantaged. But what would be the distributional impact of a new protectionism instead?

Currently, the US collects more than $33 billion a year – or roughly 0.2% of GDP – in tariffs, which are taxes on US imports. Furman, Ross and Shambaugh match import duties to standard consumer expenditure data and argue that tariffs likely impose a heavier burden on lower-income households, as these households generally spend more on traded goods as a share of expenditure/income and because of the higher level of tariffs placed on some key consumer goods.
For the US, they calculate — assuming that protection via tariffs does not induce domestic producers

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The economic effects of migration

January 16, 2017
The economic effects of migration

What’s at stake: migration is currently a very hot topic in both the US and the EU. Immigration issues have come to the forefront due to the problem of rapidly ageing populations, the refugee crisis, and growing anti-immigration political rhetoric. But what do we know about the economic effects of migration?

Jaumotte, Koloskova and Saxena at the IMF and VoxEU argue that migration, no matter how controversial politically (see figure 1), makes sense economically. In the long term, both high and low-skilled workers who migrate bring benefits to their new home countries by increasing income per person and living standards. High-skilled migrants bring diverse talent and expertise, while low-skilled migrants fill essential occupations for which natives are in short supply and allow natives

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Compensating the “losers” of globalisation

January 9, 2017

What’s at stake: According to some, 2016’s political turmoil shows that the so-called “losers” of globalisation are striking back. There is, however, little agreement on how government should respond to this challenge.

An important contribution to the debate came this week from Maurice Obstfeld. He argues that countries must protect and expand gains from trade through policies that redistribute them more equitably. Globalisation offers potential economic gains for all. But there is no guarantee that this potential will be realised if governments do not take decisive action to support those who suffer from the side effects.
The political consensus that drove trade policy over much of the postwar period will dissipate without a policy framework to spread the risks of economic openness.

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2016: The end

December 31, 2016

What’s at stake: 2016 is coming to an end. It will be remembered as an annus mirabilis and horribilis, at the same time. 2016 brought us some previously unthinkable political shocks, and admittedly took away some of our finest musicians. It also couldn’t help taking away Willy Wonka and Princess Leia, making this a much sadder Galaxy. This raises an obvious question: what are we in for, in 2017?

First, a due tribute to 2016. Tony Barber argues that we can summarise this year in one single word. The word in question is “Bundespräsidentenstichwahlwiederholungsverschiebung”, which roughly translates as “postponement of the repeat of the run-off election for federal president”, in references to the postponed re-run of the second round of this year’s Austrian presidential election. It has

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The strange case of the MPS capital shortfall

December 27, 2016

Italy’s banking saga continues with the announcement that beleaguered MPS may need to find an additional €3bn. What exactly has changed, and what does it say about ECB decision making?

Before Christmas the Italian government approved a decree authorising the use of up to €20bn of public funds to deal with the precautionary recapitalisation of Monte dei Paschi di Siena (MPS) and possibly other banks. I have discussed the details of the MPS case extensively in the past, for example here). Just when it seemed like Italy’s banking troubles had been put to rest, at least momentarily, the ECB reportedly told the Italian government that MPS now needs to raise €8.8bn of capital – rather that the €5bn previously predicted.
This is obviously a quite significant change. It almost doubles the

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The American dream

December 19, 2016
The American dream

What’s at stake: historian James Truslow Adams, in his 1931 book The Epic of America, stated that the American dream is "that dream of a land in which life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement”. Few ideas have ever been as powerful as the “American Dream”, and many recent political events hinge on the fear that this “dream” may be dead. Meanwhile, researchers have been trying to measure the reality behind the dream.

One of the defining features of the “American Dream” is the ideal of absolute income mobility, that is the expectation that children can have a higher standard of living than their parents. Despite academic interest and the policy relevance of this question, its operationalisation is made

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Socio-economic determinants of the Italian vote

December 12, 2016
Socio-economic determinants of the Italian vote

The socio-economic factors driving the ‘no’ result from Italy’s referendum differ from the Brexit vote. The italian NO vote seems to have been driven by young voters, and mostly related to a sense of economic “malaise”. However, the Brexit vote appears to have been strongly driven by older voters and somewhat less educated ones.

On Sunday 4 December, Italy held a constitutional referendum in which almost 60% of the voters decided against a reform proposed by the government. The vote triggered the resignation of Prime Minister Matteo Renzi and opened a phase of political transition that will lead to new elections.
In light of the new elections ahead, it is important to understand the factors driving this vote. To investigate this, I run a regression analysis of the share of votes for

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The political economy of macroprudential policy

December 12, 2016

What’s at stake: the emergence of renewed interest in macroprudential policy has characterised the aftermath of the great recession. There is not yet full agreement on what the tasks of macroprudential policy is or how it should be carried out, but there is a clear understanding that there is an important political economy dimension to it. We review some of the recent contribution on this.

Jon Danielsson and Robert Macrae write on VoxEU that the fatal flaw in macroprudential policy is that it ignores political risk, when political risk may be a major cause of systemic financial risk. Brexit, the rise of populist parties in Europe and the election of Donald Trump as President of the Unidìted States of America are examples of political risks that could potentially have financial

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Financial implications of the Italian referendum

December 2, 2016

On Sunday, Italy will held a constitutional referendum whose implications for the political stability of the country are uncertain. Right after the referendum, Italy’s oldest and most troubled bank – Monte dei Paschi di Siena – is expected to complete a very important and sizable capital raise. Here we look at the situation and implications of this critical juncture.

On Sunday, Italians vote in a referendum to decide whether an amendment to the Constitution proposed by the government should be implemented or not. The vote is not about any financial or economic issue, but its timing and its potential implication for political stability are such that a negative outcome could trigger some financial instability.
Italian banks are still bearing the burden of a significant load of

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The Italian referendum

November 28, 2016
The Italian referendum

What’s at stake: on 4 December, Italy will hold a referendum on a proposed constitutional reform approved by Parliament in April. The reform, which was designed in tandem with a new electoral law, aims to overcome Italy’s “perfect bicameralism” by changing the structure and role of the Italian Senate. It also changes the distribution of competences between the state and regions. After the shocks of Brexit and the US election, polls are now drifting towards a defeat of the government’s position in Italy.

Yes, or No, that is the question. Marco Simoni – who is currently an economic advisor to PM Renzi – argues that the proposed reform would address a number of key institutional weaknesses in the country. By improving the functioning of Italian democracy, it would help establish proper

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Trumpocalypse now: first reactions

November 21, 2016

What’s at stake: this question should probably be re-formulated as “what’s NOT at stake?” On Tuesday 8 November, the US elected Donald Trump as its next President. Several aspects of Trump’s political and economic agenda appear extreme (we have previously focused on his stance on trade). After the initial shock, we review economists’ opinions on what has happened and what may happen. We will be coming back to this topic regularly.

Making sense of it
If you are like me, you are still probably asking yourself how did this happen. Electoral post-mortems are painful but needed. So if you still cannot make sense of it, Sylvain Chabé-Ferret has a good summary of currently prevailing theories on the roots of populism.
One view is that this is a sign thatthe losers of globalisation arae

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Brexit and the law

November 14, 2016

What’s at stake: last week, the UK High Court ruled that the triggering of Article 50 – and therefore the Brexit process – should involve the UK Parliament. The Government will appeal the decision but this has created a new wave of uncertainty about the timing of Brexit, and on what this involvement can mean in practice. We review the different opinions.

Jo Murkens on the LSE blog has a very good explainer of the legal basis of the judgement, which he considers exemplary in its clarity and reasoning. The decision’s focus is strictly constitutional, not political: the only question it examined was whether, as a matter of UK constitutional law, the Crown, acting through the government, is entitled to use prerogative powers to trigger Article 50 in order to cease to be a member of the

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Income convergence during the crisis: did EU funds provide a buffer?

November 10, 2016

Did EU funds play an important role in limiting the hit of the crisis on regional income?

Economic convergence is at the heart of European Union integration.  Cohesion policy was born in the 1980s with the aim of complementing the creation of a single European market and fostering the economic development of less advantaged EU regions. This objective is especially relevant in light of the economic crisis that has exacted a heavy toll on many EU countries and regions, and created scepticism about the merits of EU policies.
In a recent paper, I look at how income convergence evolved in EU regions during the crisis, and assess the role played by the EU funds that are provided to the more disadvantaged regions with the aim of facilitating their convergence to average EU income levels. I

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The Wallonian Resistance

October 31, 2016

What’s at stake: this week has been filled with news that the he small Belgian region of Wallonia intended to veto CETA (the Canada-EU trade agreement). Eventually, Wallonia conceded defeat and agreed to let the agreement go on. But meanwhile, it spurred a debate on trade agreements and their sovereignty implications, which we summarise here.

Cecilia Bellora and Jean Fouré at CEPII have a review of CETA’s content. They argue that the agreement would go quite far and touch sensitive issues, such as consumer protection. This notwithstanding, it appears that a fairer reciprocity in the concession between EU and Canada has helped find an agreement, differently from what happened in the TTIP case, where negotiations are still frozen. However, a decisive question remains open, for CETA:

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An Italian take on banking crisis

October 27, 2016

The year 2016 has not been good to Italian banks. While resilient to the first wave of financial crisis in 2008, due to their low exposure to US sub-prime products and to the fact that Italy did not have a pre-crisis housing bubble, they have been suffering much from the euro sovereign crisis and the ensuing deteriorating economic conditions.

Italian banks were among the worst performers in the 2014 ECB/EBA comprehensive assessment of banks’ balance sheets. Banca Monte dei Paschi di Siena, Banca Carige, Banca Popolare di Vicenza and Banca Popolare di Milano were found in need to raise respectively 2.1bn, 0.81bn, 0.22bn and 0.17bn, for a total of 3.31bn.
Casting worries about the health of Italian banks is an unresolved and sizable (360bn) burden of Non-Performing Loans (NPLs), 14% of

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Should we rethink fiscal policy?

October 24, 2016

What’s at stake: there has been quite some discussion recently on whether we should rethink the framework of fiscal policy in order to make it more appropriate and effective in a world where demand seems to be chronically anemic, inflation is low and the interest rates are likely to stay close to zero (if not negative) for a long time. According to some of the authors, in the Eurozone these concerns are particularly pressing.

Ángel Ubide makes the case for active fiscal policy. The pre-crisis consensus on the use and scope of fiscal policy was that the business cycle would be managed by monetary policy, while fiscal policy would focus solely on debt sustainability. In that world, fiscal policy was asymmetric. That was a world of growth near potential, inflation at or above target, and

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Income convergence: did EU funds provide a buffer?

October 18, 2016

This paper shows that economic convergence continued during the crisis for the EU as a whole, although at a slower pace, but for regions in the EU14, and especially in the euro area, convergence appears to have stopped during the crisis, or even switched to a divergence path.

Economic convergence is at the heart of European Union integration. The importance of this objective has not diminished over time, and it is especially relevant in light of the economic crisis that has exacted a heavy toll on EU countries and created scepticism about the merits of EU policies.
The author looks at how economic convergence evolved in different regions during the crisis and assess the role played by those funds that are provided to the more disadvantaged regions, with the aim of facilitating

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Brexit, the pound and the UK current account

October 17, 2016

What’s at stake: UK PM Theresa May announced the intention to trigger article 50 by March 2017, the Pound Sterling crashed, and a dispute among Tesco and Unilever has resulted in Marmite shortage. Brexit means Brexit, and it continues to be highly discussed. It would be impossible to summarise all the economic blogosphere on Brexit. Our aim is to periodically update our readers on selected important aspects of what promises to be a long-lived topic of discussion. This time we are looking at economists’ view on the Pound crash and the UK current account.

First, let’s start from an update on the expected cost. A paper by the UK Treasury that was leaked this week suggests that a hard Brexit may cost £66 billion a year. The Treasury estimates that UK GDP would be between 5.4% and 9.5% of

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The Deutsche Bank Frenzy and what it says about European banks

October 7, 2016

What’s at stake: The IMF recently published its Fall Global Financial Stability Report, which points to a decrease in short-term risk but building of medium-term ones. At the same time, European market has been nervous last week on the news that Deutsche Bank (Germany’s biggest bank) has been demanded USD14bn by the US Department of Justice to settle allegations that the bank mis-sold mortgage-backed securities before the financial crisis. While reports point to a possible USD5.4bn settlement, this turmoil raises a question of whether the European financial system is still weak, eight years since the crisis. We try to summarize the reactions in the blogosphere.

The IMF released their Global Financial Stability Report (GFSR), which finds that short-term risks to global financial

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Trumping Trade

October 3, 2016

What’s at stake: Trade is a central topic in the US presidential campaign, with both candidates expressing some degree of criticism about past trade policy. But while Hillary Clinton’s position could be described as a cautious scepticism, Donald Trump’s trade plans are more openly protectionist. His proposals include high tariffs on imports, renegotiating trade agreements and possibly US withdrawal from the WTO. After the first presidential debate, we review economists’ reactions and their assessment of Trumps trade policies.

Bonus: if watching the debate unsettled you, think that Jonathan Mahler at the NYT had to do it with sounds off and no captioning! The idea was to test the theory that what presidential candidates say during debates is less important than what they look like

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Big in Japan

September 26, 2016

What’s at stake: This week saw two important Central Banks’ meetings, whose outcomes could hardly be more different. While the U.S. Federal Reserve left interest rates unchanged, the Bank of Japan introduced a big shift in its easing framework. BOJ committed itself to overshoot its inflation target of 2 percent, and introduced a targeting of the yield on ten-year Japanese government debt, initially at about zero percent. We review the economic blogosphere reaction to this latest monetary policy action.

Bonus: if you wish to re-live the sound of the 1980s German New Wave that the title alludes to, the Alphaville are here to help you.

Ben Bernanke thinks that the most surprising and interesting part of the BOJ announcement was the decision to target the ten-year JGB yield, for which

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