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Tag Archives: European Central Bank (ECB)

Is the COVID-19 crisis an opportunity to boost the euro as a global currency?

The euro never challenged the US dollar, and its international status declined with the euro crisis. Faced with a US administration willing to use its hegemonic currency to extend its domestic policies beyond its borders, Europe is reflecting on how to promote it currency on the global stage to ensure its autonomy. But promoting a more prominent role for the euro is difficult and involves far-reaching changes to the fabric of the monetary union. This note was prepared at the request and...

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COVID-19’s reality shock for external-funding dependent emerging economies

COVID-19 is by far the biggest challenge policymakers in emerging economies have had to deal with in recent history. Beyond the potentially large negative impact on these countries’ fiscal accounts, and the related solvency issues, worsening conditions for these countries’ external funding are a major challenge. COVID-19 has brought to light a reality that had been mostly forgotten in an era of ample dollar liquidity: the excessive dependence of emerging economies on external financing. The...

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The European Central Bank in the COVID-19 crisis: whatever it takes, within its mandate

To keep the euro-area economy afloat, the European Central Bank has put in place a large number of measures since the beginning of the COVID-19 crisis. This response has triggered fears of a future increase in inflation. However, the ECB's new measures and the resulting increase in the size of its balance sheet, even if it were to be permanent, should not restrict its ability to achieve its price-stability mandate, within its legal obligations. By: Grégory Claeys Date: May 20, 2020 Topic:...

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The message in the ruling

The German Constitutional Court's ruling on the ECB's asset purchase programme is open to much criticism but it can hardly be blamed for raising an important question. By: Jean Pisani-Ferry Date: May 12, 2020 Topic: European Macroeconomics & Governance From its pretence to establish itself as a custodian of the custodians to the narrowness of its perspective on central bank policy and the parochial assessment of the distributional consequences of monetary decisions, there is...

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An analysis of the German Constitutional Court’s ruling on the ECB QE programme

The German Constitutional called today on the ECB to justify its bond-buying program. What does today's ruling of the German Constitutional Court mean for the ECB's QE program? Could such a decision open a precedent when it comes to contesting EU law? Today, Giuseppe Porcaro and Guntram Wolff are joined by Franz Mayer, chair of Public Law at the University of Belefield, to analyse the German Constitutional Court's ruling. By: The Sound of Economics Date: May 5, 2020 Topic: European...

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Monetisation: do not panic

The extraordinary operations that are under way in most countries in response to the COVID-19 shock have raised fears that large-scale monetisation will result in a major inflation episode. This column argues that so far, there is no evidence that central banks have given up, or are preparing to give up, on their price stability mandate. While there are obviously some reasons to worry, central banks are doing the right thing and the authors see no reason to panic. In response to the sanitary...

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Facing the lower bound: what will the ECB do in the next recession?

In responding to the global financial crisis, the ECB has pushed its monetary policy into unchartered territories . Today, it appears increasingly constrained by persistently low interest rates. This paper seeks to understand this challenge and assess whether its toolkit would allow the ECB to weather a European recession. This paper was written in October 2019. It is a chapter of the report “The Euro in 2020, A Yearbook on the European Monetary Union”, edited by Fernando Fernández Méndez...

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COVID-19 Fiscal response: What are the options for the EU Council?

It is time for the EU Council to make quick progress on the fiscal front and announce something as soon as possible to show that it taken full measure of the severity of the situation. As the COVID-19 pandemic intensifies, and now that Europe has become one of its epicentres, voices are raised among EU countries in support of a common and significant European response to deal with the health situation and the related economic crisis currently unfolding. Many options are currently discussed in...

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Coronavirus and the politics of a common fiscal instrument

Coronavirus means many European Union countries will soon face major increases in their sovereign debt burdens, exacerbated by the sudden collapse of economic activity. What should the European Union do to address these debt problems? The economic challenge arising from the coronavirus crisis has multiple facets, including a supply-side shock, huge drops in demand and liquidity issues. Debt is a major challenge. Many European Union countries will soon face big increases in their nominal...

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What should be done to reduce euro-area spreads?

Spreads are rising again in the euro-area at the worst possible time, when fiscal policy is needed to fight the coronavirus pandemic and the related economic shock. This blog post reviews the main options available to European policymakers, their feasibility and potential effectiveness to deal with this issue. By: Grégory Claeys Date: March 18, 2020 Topic: European Macroeconomics & Governance As a result of an unfortunate declaration by European Central Bank President...

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