Follow Dr. Andreas Höfert
Five years after the Great Recession 2008–09 is a good time to assess the policies enacted by countries and regions to fight it. Two years ago such an analysis would have opposed two ways of dealing with the recovery – austerity versus growth. By now there should be a clear winner. Or is the debate subtler?
Janet Yellen’s confirmation as the new US Federal Reserve Chairwoman by the US Senate two weeks ago puts the concept of “optimal control” in prominent position within the toolkit and jargon of central banking. This concept has been central in Yellen’s reflections on monetary policy in important speeches over the last couple of years.
What a bizarre question. Trade surpluses (or their big sisters, current account surpluses) seem to be what every country is supposed to aspire to. They are the way, for example, that Germany thinks the euro crisis should be solved. The New Year’s resolution of many European politicians in the “peripheral” countries is quite likely: get our house back in order, become more competitive and achieve trade surpluses.
Allow me to revisit my skepticism of forward guidance, the new fad among central banks. They now use this communication tool to steer market expectations, but I have my doubts how usefully.
It took 31 days before coalition negotiations started after the German general elections, and another 35 days – with an end spurt of 17 hours – to hammer out a coalition agreement between the major German parties, Chancellor Angela Merkel’s conservative CDU/CSU and the left-leaning Social Democrats (SPD). But the grand coalition (Grosse Koalition, short “GroKo” in German) that is likely to rule Germany for the next four years finally took shape on 27 November.
In the mid-1990s before the creation of the euro, many economists analyzed whether the incipient European Monetary Union (EMU) was de facto an optimum currency area and whether it would make sense for a European country to join. Economists opined firmly, “it depends.”
The IMF’s Jacques Polak Annual Research Conference is usually of very high caliber. Highly ranked academic economists debate new advances in economic theory and empirical evidence with IMF staff and central bankers. This year’s conference – the 14th – dealt with “Crises: Yesterday and Today” and was the last in which Ben Bernanke participated as chairman of the Federal Reserve. It thus had an undertone of appraisal and critique of the policies Bernanke implemented in his eight-year chairmanship, especially in the last five years since Lehman went bust.
Every six months, the US Department of Treasury publishes its semiannual Report to Congress on International Economic and Exchange Rate Policies. In this 30-page document, it gives praise to and lays the blame on the rest of the world for its trade practices. One of its running stories over the last couple of years has been the question whether China will finally be given the infamous label of “currency manipulator.” In this sense, the latest report was somewhat of a first, as this time, the bulk of the blame was not heaped upon the usual suspects China and Japan, but on Germany and, to a lesser extent, the Netherlands.
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