Economy & Markets

Edited by Donato Masciandaro and Gianmarco Ottaviano

Terzo re
2020-03-29 Donato Masciandaro

The Rise of the Third King

In the weeks of the coronavirus, everything that has happened - or not happened - in American economic and monetary policy has immediately reverberated around the world, including through the channel represented by the dollar. It is no coincidence that the first coordinated action between the central banks of the United States, the European Union, the United Kingdom, Japan, Switzerland, and Canada was a dual intervention - the first on the 15th and the second on the 20th of March - aimed at strengthening dollar repo channels between the Fed and other central banks, both in terms of volumes, that ...

2020-03-16 Donato Masciandaro

Coronavirus and Central Banks: Two False Steps

Modern monetary policy is based on facts and words. In dealing with the emergence of the macroeconomic risk of the coronavirus the Fed has gotten the facts wrong, while the ECB has gotten the words wrong. Let us see why. In general terms, the coronavirus belongs to the macroeconomic family of rare events. As such, its effects on the dynamics of the choices of families, businesses, and financial markets can be both significant and at the same time unpredictable, both in terms of extent and duration. So the coronavirus is a catalyst for uncertainty, that places every central bank in front of a temporal ...

2020-03-09 Gianmarco Ottaviano

Post-Brexit Negotiations: It’s Time to be Pragmatic

In the first week of March, the negotiations between the European Union and the United Kingdom began on future relations after Brexit. To begin to understand how things will develop, it’s useful to define the situation, rapidly reviewing the fundamental steps taken recently on both sides of the Channel. Almost four years after the British referendum on Brexit, on January 31, 2020, the United Kingdom left the European Union - and the European Atomic Energy Community (Euratom). The method of withdrawal is governed by the “Withdrawal Agreement,” that regulates the credit and debit relationships ...

2020-01-10 Gianmarco Ottaviano

Brexit 2.0: The Chickens Come Home to Roost

Has something really changed for Brexit after Boris Johnson’s triumph in the recent British parliamentary elections? It certainly seems that way, but not for the reasons many people believe, that is, that clarity has finally been reached on the will of the people, who’s in charge in a democracy, and what type of Brexit we can expect. Boris Johnson’s Conservatives won the elections, with an 80-seat majority (their largest majority since 1987) thanks to 43.6 percent of the vote (the highest percentage of any party since 1979). With that majority Johnson will no longer have to duel with a largely ...

2019-12-04 Donato Masciandaro

Lagarde, A Wise Owl Between Hawks and Doves

The handover of responsibility from Mario Draghi to the new president of the European Central Bank Christine Lagarde was marked by three aspects: two results, and one question. The two results regard the ability to implement unconventional monetary policies and the reliability of the Bank's institutional structure. The question regards the future. The first result can be appreciated by remembering that Draghi's term coincided with macroeconomic events that were extraordinary, in the literal sense of the term. The dual recession that the European Union suffered in the years between 2008 and 2013 ...

2019-11-18 Gianmarco Ottaviano

What Globalization Has to Do with the Football Industry

Globalization changes the conduct of companies. On the one hand, they have access to new international markets, while on the other, they have to deal with new competitors on their own domestic markets. Yet there is an underlying asymmetry. While all companies suffer the harm due to the increase of internal competition, only the most efficient are able to offset that with the benefits linked to greater penetration of foreign markets. The reason is that access to those markets entails additional costs. Some are determined by greater complexity in logistics and distribution of products abroad. Others ...

2019-10-09 Donato Masciandaro

The Report Cards for Draghi and the Euro

With the change at the helm of the European Central Bank (ECB) from Mario Draghi to Christine Lagarde, can we try to issue grades on the relationship between monetary policy, the euro, and the Italian economy? Such an exercise is a subject to be handled very prudently. In fact, no direct relationship exists between monetary instruments and the relevant macroeconomic effects. Rather, there is a chain of relationships, of which monetary policy can be one of the first links, while macroeconomic results are the last link. The challenge for a central banker is to understand under what conditions the ...

2019-09-24 Gianmarco Ottaviano

The Tariff War

“When a country like the United States is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win.” These were the words with which U.S. President Donald Trump announced the “trade war” (with the imposition of tariffs) between the United States and the rest of the world on March 2, 2018, on Twitter. The reference was to the deficit between American exports and imports, that in absolute terms has never been less than 400 billion dollars in the past decade, and in 2018, touched the record level of 600 billion. This ...

2019-08-28 Donato Masciandaro

Libra Glitters But Is Not Gold

Not all that glitters is gold. The old popular maxim provides the first comment that can be offered in response to Facebook’s announcement that it wants to issue its own digital currency, called Libra. If we assess the announcement from the standpoint of collective well-being, we must ask if this innovation meets the requirements that a currency must have to improve the allocation of goods and services. The response, based on the information available, is negative. The announcement that there could be a new currency in circulation spontaneously begs the question: do we need it? In order to answer, ...

EU beni pubblici
2019-07-03 Gianmarco Ottaviano

Public Goods Need Europe

There are at least three wrong ideas that need to be cleared up to begin a constructive debate on the role of the European Union at this point in history. The first is that the important decisions in the EU are made in Brussels without any involvement of the Member States. The second is that the decisions made in Brussels have no democratic basis since they are made by bureaucrats not elected by the people. And the third is that there are no truly “European” decisions that Member States should make together with Brussels. The fundamental purpose of the European Union is to allow the governments ...