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This Forum

Public Debt and Growth in Times of Low Interest Rates

The discussion about low interest rates and appropriate debt rules gained renewed impetus after Olivier Blanchard’s 2019 presidential address to the American Economic Association. Interest rates are persistently below growth rates in most advanced economies, including euro area sovereigns. Under these conditions, could an active use of fiscal policy lead to a more stable growth rate? What are the main impediments to a more active fiscal policy? How much leeway do the fiscal authorities in the euro area have to follow counter-cyclical fiscal policies aimed at providing some stimulus to the economy? With interest rates much below growth rates, should concerns about debt sustainability in Europe be put to rest?

In our latest Forum, Carl Christian von Weizsäcker, Ángel Ubide, Paul De Grauwe, Yuemei Ji and Yoshiyasu Ono consider private wealth, Golden Rules, animal spirits and the Japanese model as they provide their answers to the questions surrounding this extremely timely topic.

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Conference Announcement

The Rise of Populism: Case Studies, Determinants and Policy Implications
Data-Driven Economy: Challenges and Opportunities

Join us on 7 November in Brussels for our 9th annual Intereconomics/ CEPS Conference! We look at the rise of new political parties and peoples’ movements and how they couple with the great recession, fiscal adjustments, an increase in migration, cultural backlash and the rise of nationalism and euroscepticism. How are changes in the political landscape, particularly the rise of populist sentiment, playing out across Europe? Join the conversation on 7 November with keynotes by Sir Paul Collier and Marcel Fratzscher accompanied by several distinguished panelists. See you there!

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Figure of the Month

Interest rate regimes in selected eurozone countries

Interest rate regimes in selected eurozone countries

This figure from Paul De Grauwe and Yuemei Ji's forum article "Time to Change Budgetary Priorities in the Eurozone" from our current issue shows the evolution of the interest rate (r) minus the growth rate of GDP (g) since 2013. They observe that r - g declined in all the examined eurozone countries.

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Open Access Now!

Intereconomics 2017/4

In this issue's Forum The European Digital Single Market ten economists debate the achievements and shortcomings of the European Commission's DSM strategy. Other articles cover a wide range of topics as Macron, the Agreement on Net Financial Assets (ANFA), Business Cycle Desynchronisation, Strong Europe with More National Scope of Action, Growth Forecasts for China and America's Health Care War.

To Intereconomics July/August 2017

Monetary System

Two Views of the International Monetary System

Barry Eichengreen breaks down the two schools of thought on the future of the international monetary system, named after two top schools: Harvard University and the University of California Berkeley. The 'Harvard view', states that there is a striking degree of persistence in the structure of the system, which is dollar-based and U.S. led to a large extent. Whereas the 'Berkeley view' believes that the system is evolving away from the US and the dollar, toward a multipolar world in which several consequential international and reserve currencies will coexist, other countries will no longer rely exclusively or even mainly on the U.S. for international liquidity and governance will be a collective endeavor. Find out which view he espouses in this article. Spoiler alert: Eichengreen is a Berkeley professor.

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Quote of the Month

The secular decline in long-term nominal interest rates

"Very low real interest rates and inflation may appear to be a great outcome, but they are not. Excessively low nominal rates reduce welfare, as they limit the policy scope to cushion recessions and the business cycle – in other words, the expected future output gap increases."

from Ángel Ubide's article Fiscal Policy at the Zero Lower Bound

Letter from America

US States Lead the Way on Climate Policy

The societal price of harmful emissions is not reflected in the private market cost of producing or consuming energy, and as a result, energy markets produce too much carbon emission in the absence of policy, write Karen Palmer and Kathryne Cleary during Climate Week at the United Nations in New York City this fall. In the absence of federal action, several states have implemented Renewable Portfolio Standards (RPS) that cost-effectively limit emissions and encourage deployment of renewable resources to help provide a solid foundation for future policy.

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Brexit

Deal or no Deal?

Boris Johnson wants to take the UK out of the European Union — deal or no deal — on 31 October 2019. What are the consequences of the UK leaving the EU without a deal? Read a selection of Intereconomics articles on Brexit:

A Hard-but-Smart Strategy and its Consequences by Gabriel Felbermayr
The Harder the Brexit, the Harder the Impact on Northern Ireland by Lucinda Creighton
If Nothing is Achieved: Who Pays for the Brexit? by Michael Hüther, Matthias Diermeier, Markos Jung, Andrew Bassilakis
Macroprudential Risk Management Problems in Brexit by Paul J. J. Welfens

Forum

Competition and Competition Policy in a Data-Driven Economy

How has the digital economy changed value chains and competitive processes in many industries and markets? Justus Haucap explains the importance of digital platforms and the essential nature of data across so many industries. And while data has been referred to as the 'new oil' of this century, he jokes that although both data and oil may be extracted via platforms, they are still different in that data is non-rival in use and it is not only non-exhaustible, but growing. These differences have substantial consequences for competiton policy and Haucap lays them out in this article.

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