Congratulations to Philip, and good luck in his important new role.
http://www.irishtimes.com/business/economy/philip-lane-appointed-governor-of-the-central-bank-1.2398674
Free until 31 December to celebrate 30 years of Economic Policy:
Virtual Issue: The Financial Crisis
We’ve pulled together a collection of articles reflecting on the range of analysis on the Global Financial and Eurozone crises appearing in Economic Policy over the last 5 years. This virtual issue focuses on one of the most acute contemporary challenges to economic policy and how the journal has contributed to our understanding of the European experience.
Cyprus: from boom to bail-in
Alexander Michaelides (2014) 29 (80): 639-689
The Greek debt restructuring: an autopsy
Jeromin Zettelmeyer, Christoph Trebesch, Mitu Gulati (2013) 28 (75): 513-563
External imbalances in the eurozone
Ruo Chen, Gian Maria Milesi-Ferretti, Thierry Tressel (2013) 28 (73): 101-142
The eurozone crisis: how banks and sovereigns came to be joined at the hip
Ashoka Mody, Damiano Sandri (2012) 27 (70): 199-230
From Great Depression to Great Credit Crisis: similarities, differences and lessons
Miguel Almunia, Agustín Bénétrix, Barry Eichengreen, Kevin H. O’Rourke, Gisela Rua (2010) 25 (62): 219-265
Lessons from a collapse of a financial system
Sigridur Benediktsdottir, Jon Danielsson, Gylfi Zoega (2011) 26 (66): 183-235
The great retrenchment: international capital flows during the global financial crisis
Gian-Maria Milesi-Ferretti, Cédric Tille (2011) 26 (66): 289-346
Recapitalization, credit and liquidity
Mike Mariathasan, Ouarda Merrouche (2012) 27 (72): 603-646
Systemic risk, sovereign yields and bank exposures in the euro crisis
Niccolò Battistini, Marco Pagano, Saverio Simonelli (2014) 29 (78): 203-251
Financial crises: lessons from history for today
Selin Sayek, Fatma Taskin (2014) 29 (79): 447-493
Banking crisis management in the EU: an early assessment
Jean Pisani-Ferry, André Sapir Econ Policy (2010) 25 (62): 341-373
This virtual issue is part of a broader celebration of Economic Policy’s 30th anniversary, which also includes the publication of Thirty Years of Economic Policy: Inspiration for Debate. Thirty Years of Economic Policy situates the Journal within a long view of its influence on economic-policy thinking, bringing together a selection of highly influential articles from the first 30 years of Economic Policy, which analyse some of the key global economic-policy challenges of our time within five broad areas: monetary and exchange rate policy; fiscal policy; European integration; unemployment and labour markets; and market regulation. Thirty Years of Economic Policy reflects on the major contribution that the Journal has made to economic-policy debate since its launch in 1985, and provides students, researchers and policy professionals a ‘reader’ of the progress we have made in understanding these key issues.
Tomorrow is the anniversary of the “Black Monday” crash: summary of that event here.
Here are three papers I have read recently.
1. Reinhart and Trebesch on the way that external debts can hollow out local democracies. No need to elaborate on this I think.
2. Avdjiev, McCauley and Shin on cross-border banking: well worth a read for people not familiar with this stuff. They are talking about complicated transactions, but as we know in Ireland, much simpler transactions (banks borrowing overseas) can have dangerous consequences.
3. Athanasios Orphanides on the highly politicised nature of crisis decision-making in the Eurozone.
From 3, and from everything that we have observed during this crisis, from Ireland in 2010 to Greece in 2015, I infer that a small country is much more vulnerable inside the Eurozone than outside, if it gets into trouble. Outside, you will deal with the IMF on its own, and they have a standard policy template: debts will be written down, currencies will be devalued, and yes, there will also be austerity. Inside the Eurozone creditor countries will sit alongside the IMF at the table and you may find that neither of the first two policies will be feasible, which will make the austerity far more harmful than it would otherwise be, both economically and politically.
From 2, I infer that a small country needs to watch its banks like a hawk, especially if it is inside the Eurozone, because (from 1, and 3, and from what we have experienced since 2010) the political consequences of not doing so are just too damaging.
And from 1 and 3, I infer that government debts are something that small countries inside the Eurozone also need to be very concerned about. Especially in a monetary union without a banking union, like ours.*
So I find myself in agreement with Colm McCarthy. As was the case 15 years ago, we need to worry about the possible real exchange rate consequences of expansionary fiscal policy at this point in the cycle. And to be fair to the Irish economics profession, lots of people did worry about that then. But the main concern for me is no longer about economics, but about the risks to our Republic’s democracy. The price of freedom is eternal vigilance.
*What is a banking union? If Arizona elects a bunch of communists or survivalists to run the state, and the state budget explodes as a result, local banks will still be backed up by the Fed. My money will still be safe. I will still be able to withdraw it if I choose. This is what a banking union looks like, and don’t let anyone in Brussels or Frankfurt tell you any different.
Papers are available here.