Documents Whelan, Karl 5 results

"The introduction of the euro meant that countries with sovereign debt problems could not use monetization and devaluation as a way to prevent default. The institutional structures of the euro were also widely thought to prevent a country in difficulties being bailed out by other euro members or having its sovereign debt purchased by the European Central Bank (ECB). Despite these restrictions, there was relatively little discussion about sovereign default in pre-Economic and Monetary Union debates among economists, and financial markets priced in almost no default risk in the pre-crisis years. The crisis has seen bailouts and bond purchases by the ECB but there has also been a sovereign default inside the euro and further defaults seem likely. The introduction of the euro was intended to bring greater stability by ending devaluations triggered by self-fulfilling runs on a currency. While this particular scenario can no longer happen, this paper discusses mechanisms whereby expectations that a country may leave the euro can lead to this outcome occurring."

"The United States (US) have responded to the COVID-19 shock with a massive fiscal stimulus in 2020 and 2021. At the same time, the Federal Reserve (Fed) has maintained a highly accommodative monetary policy stance. However, the Fed's new average inflation targeting regime is being put to the test by the spike in inflation observed in recent months. Due to the global influence of the US economy and interlinkages with the euro area, questions arise over the possibility of significant spillovers from these US policy measures. Five papers were prepared by the ECON Committee's Monetary Expert Panel, looking into the channels of Transatlantic fiscal and monetary policy spillovers and their significance in the current context. This publication is provided by Policy Department A for the Committee on Economic and Monetary Affairs (ECON), ahead of the Monetary Dialogue with ECB President Lagarde on 21 June 2021."

"The eurozone's TARGET2 payments system has featured heavily in academic and popular discussions of the euro crisis. Some of this commentary has described the system as being responsible for a ‘secret bailout' of Europe's periphery. Another common theme has been that the system has built up large credit risks for Germany should the euro break up. This paper discusses the TARGET2 system, focusing in particular on how it impacts the balance sheets of the central banks that participate in the system. It discusses the factors driving TARGET2 balances, considers some counterfactual cases in which eurozone monetary policy might have operated differently, examines the risks to Germany and considers proposals for settlement of these balances. — Karl Whelan"

"Despite the widespread popularity of the Solow growth model, much of the recent empirical work based on the classic framework misrepresents a crucial feature of the model. Namely, the growth rate of technological progress, assumed to be exogenous in the Solow model, is often identified as being constant across countries. This simplification of the behaviour of technological progess runsounter to the evidence and has had a number of significant implications for the interpretation of the Solow model. One implication has been an overemphasis on the role of factor accumulation in explaining cross-country income differentials. In addition, the commonly cited empirical result that the speed of conditional convergence is slower than predicted by the Solow model is a function of this inaccurate assumption about technology, rather than due to a failure of the model itself. "