The Week That Was in Europe

Klaus Adam & Dirk Schumacher
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Jul 15, 2022 • 24min

How much ECB hiking is needed to get inflation under control?

We discuss whether the ECB tightening path implied by current market prices is sufficient for getting inflation under control in the Euro Area. We highlight the role played by the neutral real rate, the slope of the Phillips curve and inflation expectations for inflation dynamics going forward. The ECB working paper by Marta Banbura und Elena Bobeica that we mention in the podcast is available here: https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp2471~fc87caada8.en.pdf?9306b59fe8f49ee4e6e926121283ac85
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Jul 8, 2022 • 20min

Will Higher Interest Rates Lead to Higher Capital Productivity?

Periods of high real interest rates are historically associated with high productivity growth and a high marginal product of capital. We discuss to what extent this implies that the expected increase in real interest rates due to ECB tightening measures will increase the marginal product of capital and productivity growth.
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Jul 1, 2022 • 40min

A Conversation with Klaus Regling (ESM) about Europe

We talk with Klaus Regling, Head of the European Stability Mechanism (ESM), about the ESM's financial support programs, the OMT program, conditionality in these programs, and about fiscal rules in Europe.
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Jun 17, 2022 • 22min

The ECB's Fight Against Country Spreads: Limits & Opportunities

We dicuss whether Euro Area sovereign bond spreads behave in unusual ways, whether or not the ECB should do something about them, and the potential pitfalls of ECB interventions. The academic paper mentioned in the podcast is available here: https://doi.org/10.1515/ger-2018-0094
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Jun 10, 2022 • 20min

Review of this Week's ECB Meeting (June 2022)

We review the ECB decision to end asset purchases and to embark on an interest rate hiking cycle, in light of record high Euro Area inflation rates. We focus on the likely path forward for interest rates and the challenges associated with seeking to contain interest rate spreads across Euro Area member countries.
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Jun 4, 2022 • 23min

What Drives the Labor Share of Income?

The share of national income going to workers has been trending downwards over time in many advanced economies, including in Europe. We discuss to what extent this development is really there in European data and what economic mechanism can account for it. We draw on insights provided by the following articles: Gutierrez & Piton, "Revisiting the Global Decline in the (Non-Housing) Share of Income", AER Insights, 2021, https://www.aeaweb.org/articles?id=10.1257/aeri.20190285 Kehrig & Vincent, "The Micro-Level Anatomy of the Labor Share Decline", Quarterly Journal of Economics, 2021, https://doi.org/10.1093/qje/qjab002 DeLocker and Eeckhout, "Global Market Power", working paper, 2020, https://crei.cat/wp-content/uploads/2020/10/GLOBAL.pdf
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May 30, 2022 • 39min

A Conversation with Lars Feld (Economic Advisor to the German Finance Minister)

We discuss with Lars Feld about a recent paper published by the German Finance Ministry outlining guideposts for economic and fiscal policy the German view on the reform of fiscal rules in Europe the role of gas and oil embargos the outlook on the German Green transition
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May 13, 2022 • 24min

The Cyclical Outlook for the Euro Area: Difficult Business

We discuss the main indicators providing information about the short-term Euro Area economic outlook. We also discss why forecasting is generally difficult and why standard forecasting tools do not perform well during the current period and what can be done about it. We mention two academic papers: "Nowcasting with Large Bayesian Vectorautoregressions", by Cimadomo, Giannone, Lenza, Monti & Sokol, ECB Working Paper No. 2453, 2020 "How to Estimate a VAR after March 2020", by Lenza & Primiceri, ECB Working Paper No. 2461, 2020
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May 6, 2022 • 30min

Who is Olaf Scholz? A Conversation with Mark Schieritz (Die Zeit)

We discuss with Mark Schieritz about the political approach, personal traits, and recent political decisions of Germany's new Chancellor Olaf Scholz. Mark Schieritz is a leading journalist at Germany's weakly newspaper "Die Zeit" and the author of a recent book about Germany Chancellor Olaf Scholtz, titled "Olaf Scholz - Wer ist unser Kanzler?".
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Apr 29, 2022 • 18min

Two Challenges for the ECB: A Faster Green Transition & International Decoupling

We discuss how ECB policy will be affected by #1 the likely acceleration of the Green transition, triggered by the Russian invasion & high prices for fossil fuel, and #2 the international economic decoupling between Western economies and Russia/China, as triggered by the same geopolitical tensions. We argue that both developments will require an increase in real interest rates in the short term, even if they may lower them in the long-term.

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