AS NEW ECONOMIC Counsellor and Director of Research Department (RES), Gita Gopinath, settles into her new role at the IMF, what might her priorities be to make an imprint on the world’s premier monetary institution? Here’s a suggestion. She might begin by taking control of the IMF’s global forecasts—and do so with a view to rekindling the prospects for global macroeconomic policy coordination. Continue reading “On the prospects for global macroeconomic policy coordination”
To suppose large and successive [external] balances to be formed into a debt is to assume an accumulation of debt which is almost equally incredible.
Henry Thornton, Paper Credit, 1805
PDF: Hidden information_FINAL.
Charts: Hidden information_chartpack.
THERE WAS ONCE a time when international macroeconomics was conducted largely through the prism of the central bank’s balance sheet. Absent all but patchy data or guesswork on external current or financial transactions—such as the overall goods and service balance or net lending abroad—changes in central bank reserve assets, typically specie, served as the only real indicator of net flows against the rest of the world—if not, of course, internal drain. Thus, monitoring balance sheets became crucial for investors. Continue reading “Hidden flows: Asset prices and eurosystem balance sheets”
Here are some notes on public debt sustainability. Since WordPress apparently cannot tolerate equations I am forced to post the pdf version here and the introduction and main themes below: On debt sustainability
Anyone invested in Argentina right now will benefit from reading till the end. Continue reading “On debt sustainability, functional finance, and the transfer problem”
THE PERCEPTIVE Simon Tilford of the Centre for European Reform has noticed a curious feature of Germany’s external accounts: her net international investment position (NIIP) reveals net “foreign assets have risen much less rapidly than the accumulated current account surpluses, leading to … losses: around €580 billion since 1999.” Continue reading “Germany’s Missing €500 billion”
Consolidated Parts I to III in pdf. Fixing Greece_FINAL
What happens next?
OF LATE, Greece’s current account has come close to registering, but has not yet equalled, surpluses achieved by her comparators at the time their crises abated. Against this, Greek public external debt remains much larger. Continue reading “Fixing Greece: Part III”
The Greek transfer problem
THE MACROECONOMIC challenge facing Greece in 2010 was side-stepped from the start—driving, in turn, policy missteps.
Figure 3 highlights the truly extraordinary non-resident purchases of Greek government debt—capital inflows—during the decade from 1999. The left chart uses the Bank of Greece’s excellent flow of funds data—recorded at market value of transactions—to track the 4-quarter sum of non-resident and resident purchases of Greek debt. It also shows the fiscal balance throughout. Continue reading “Fixing Greece: Part II”
WITNESS, IF YOU WILL, the resurrection of the Greeks. Disbursement of €7.7 billion on 7th July by the European Stability Mechanism (ESM), with another €0.8 billion soon to follow, and an “Agreement in Principle” International Monetary Fund (IMF) precautionary arrangement, has brought Greece to life once more—and deservedly so.
The Greek government bond (GGB) 10-year yield at roughly 5½ percent sits close to post-crisis lows. The Tsipras government has returned to markets with a five-year bond with 4.635 percent coupon, below that attained by the previous administration in 2014. SYRIZA can be forgiven for eyeing program exit. Continue reading “Fixing Greece: Part I”
IT’S PERHAPS the greatest irony of all: just as euro area crisis appears consigned to history, should the European Central Bank (ECB) meet its 2 percent inflation target peripheral stress could return!
How so? In short: rapid unwinding of the ECB’s Asset Purchase Program (APP) due to building inflation pressure would rekindle balance of payments pressures in TARGET2 (T2) debit countries—triggering a rise in yields, slowdown in growth, and fears once more for debt sustainability. Continue reading “The ECB’s TARGET2 challenge”
THE SPECTACULAR increase in Germany’s external current account balance since the millennium—from €37 billion deficit in 2000 (-1¾ percent of GDP) to €263 billion surplus as of 2017Q1 (+8¼ percent)—has caught the eye of commentators and policymakers alike in recent years. Continue reading “Germany’s current account and global adjustment”