The Week That Was in Europe

We discuss with Ulrich Bindseil, Director General at the European Central Bank, about central bank balance sheets and the role of upcoming central bank losses, associated with past expansion of central bank balance sheets and rising short-term interest rates.

We review and evaluate the main monetary policy decisions taken in the ECB meeting on Oct 27, 2022.

We discuss with Prof. Stefan Reichelstein about cost effective ways to achieve the Green Transition in Europe and the U.S.. Prof. Reichelstein is Director of the Mannheim Institute for Sustainable Energy Studies (MISES) and was formerly professor at Stanford & Berkeley. More information about MISES is available here: https://www.uni-mannheim.de/en/mises/

European governments have become accustomed to running persistent primary deficits. This is only sustainable for debt dynamics if interest rates R are below the economy's growth rate G. We check if R < G was satisfied over the past 20 years and the discuss the outlook for this relationship in the future. Papers we mention in the podcast are: Atif Mian, Ludwig Straub, and Amir Sufi. Forthcoming. “What explains the decline in r*? Rising income inequality versus demographic shifts.” Proceedings of the 2021 Jackson Hole Symposium. Paul Schmelzing, "Eight centuries of global real interest rates, R-G, and the ‘suprasecular’ decline, 1311–2018", https://www.bankofengland.co.uk/working-paper/2020/eight-centuries-of-global-real-interest-rates-r-g-and-the-suprasecular-decline-1311-2018

What factors are driving price formation in European gas markets? And which ones will drive prices near-term, i.e., in the upcoming winter, and beyond? Natixis commodity expert Joel Hancock succinctly provides us with his insights.

Federal elections in Italy and fiscal measures announced in the U.K. raised new questions about fiscal sustainability in both economies. We compare the medium-term growth outlook and the underlying fiscal position in Italy with that in the U.K.

We discuss the economic costs of a permanently high inflation rate. Economic theory suggests that inflation affects economic outcomes along a number of channels. We evaluate the quantitatitve importance of these channels and the empirical evidence that exists in their support. Papers mentioned in the podcast: Nakamura & Steinsson (Quarterly Journal of Economics, 2018), The Elusive Costs of Inflation: Price Dispersion During the Great U.S. Inflation, https://doi.org/10.1093/qje/qjy017 Adam et al. (Journal of Monetary Economics, forthcoming), The case for a positive Euro Area inflation rate: evidence from France, Germany and Italy, https://jimdo-storage.global.ssl.fastly.net/file/3eb2213a-50d0-47b7-88be-93858a266cb9/AdamGautierSantoroWeber_JME.pdf Guido Ascari (2022, unpublished), The Long-Run Phillips Curve Is ...a Curve, https://sites.google.com/site/guidoascari/working-papers?authuser=0

We discuss how a large manufacturing share and large trade exposure affect Germany in times of high energy prices & deglobalization risk.

We discuss the main aspects around the European Central Bank's decision from September 8 2022, and the outlook for policy rates going forward.

We critically review and discuss the major decisions elements of the important July 2022 ECB Governing Council meeting.