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Deleveraging, What Deleveraging? The 16th Geneva Report on the World Economy

Deleveraging, What Deleveraging? The 16th Geneva Report on the World Economy

The world has not yet begun to deleverage its crisis-linked borrowing. Global debt-to-GDP is breaking new highs in ways that hinder recovery in mature economies and threaten new crisis in emerging nations – especially China. This column introduces the latest Geneva Report on the World Economy. It argues that the policy path to less volatile debt dynamics is a narrow one, and it is already clear that developed economies must expect prolonged low growth or another crisis along the way.

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Is the ECB doing QE?

Is the ECB doing QE?

Last week, the ECB announced that it would begin purchasing securities backed by bank lending to households and firms. Whereas markets and the media have generally greeted this announcement with enthusiasm, this column identifies reasons for caution. Other central banks’ quantitative easing programmes have involved purchasing fixed amounts of securities according to a published schedule. In contrast, the ECB’s new policy is demand-driven, and will only be effective if it breaks the vicious circle of recession and negative credit growth.

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A Limited Central Bank

A Limited Central Bank

We posted this in November, but are re–posting now because it is relevant. Hat tip goes to Barry Ritholtz who published it over at the Big Picture recently. Also see two previous posts on this site from November related to this one, based on earlier commentary by Philadelphia Fed President Charles Plosser: The Limits of Monetary Policy, Part 1 and […]

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The euro crisis: Muddling through, or on the way to a more perfect euro union?

The euro crisis: Muddling through, or on the way to a more perfect euro union?

After a promising first decade, the Eurozone faced a severe crisis. This column looks at the Eurozone’s short history through the lens of an evolutionary approach to forming new institutions. German dominance has allowed the euro to achieve a number of design objectives, and this may continue if Germany does not shirk its responsibilities. Germany’s resilience and dominant size within the EU may explain its ‘muddling through’ approach to the Eurozone crisis. Greater mobility of labour and lower mobility of under-regulated capital may be the costly ‘second best’ adjustment until the arrival of more mature Eurozone institutions.

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Repairing the transmission of monetary policy through asset-backed securitisation

Repairing the transmission of monetary policy through asset-backed securitisation

By Markus K Brunnermeier and Yuliy Sannikov This post originally appeared on Vox and represents what this site believes is a very likely action the ECB could take for monetary easing later this week. Eurozone monetary policy transmission is broken. A key aspect of this is the failure of credit to get to small and medium enterprises, and consumers. This […]

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How money matters: The Old Lady fails to get an “A”

How money matters: The Old Lady fails to get an “A”

Andrea Terzi Dr. Terzi is a Professor of Economics at Franklin University Switzerland and a Research Associate with the Levy Economics Institute of Bard College. One thing’s for sure: The financial crisis has dealt a deadly blow to what was until recently considered the state-of-the-art of monetary policy. Just compare the 1992 edition of Modern Money Mechanics, published by the […]

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Proactive fiscal tightening damages income growth

Proactive fiscal tightening damages income growth

While the credit expansion/savings reduction needs to continue to grow to support GDP growth, the credit expansion/savings reduction doesn’t need to ‘spike up’ proactively as it does when the fiscal tightening is proactive.

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Political connections in turbulent times

Political connections in turbulent times

By Daron Acemoglu, Simon Johnson, Amir Kermani, James Kwak, Todd Mitton This post was originally published at Vox. Political connections affect economic outcomes in emerging markets. This column discusses new evidence showing that something similar goes on in the US. Over the ten trading days following the announcement of Timothy Geithner as Treasury Secretary, financial firms with a connection to […]

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Retail sales and jobless claims

Retail sales and jobless claims

Again, the income to support sales just doesn’t seem to be there, as the sub 3% federal deficit doesn’t seem to have been providing the spending needed to offset the demand leakages (unspent income). And squinting at the jobless claims chart, if anything, it seems to have bottomed and be nudging irregularly higher.

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Turmoil in emerging markets: What’s missing from the story?

Turmoil in emerging markets: What’s missing from the story?

The Federal Reserve’s ‘taper talk’ in spring 2013 has been blamed for outflows of capital from emerging markets. This column argues that global growth prospects and uncertainty are more important drivers of emerging-market capital flows than US monetary policy. Although crises can affect very different countries simultaneously, over time investors begin to discriminate between countries according to their fundamentals. Domestic investors play an increasingly important – and potentially stabilising – role. During a financial crisis, ‘retrenchment’ by domestic investors can offset foreign investors’ withdrawals of capital.

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The roots of shadow banking

The roots of shadow banking

The ‘shadow banking’ sector is a loose title given to the financial sector that exists outside the regulatory perimeter but mimics some structures and functions of banks. This column introduces a new CEPR Policy Insight that looks into what we have learned about shadow banking since the Global Crisis.

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Why fiscal sustainability matters

Why fiscal sustainability matters

By Willem Buiter This post first appeared on Vox Fiscal sustainability has become a hot topic as a result of the European sovereign debt crisis, but it matters in normal times, too. This column argues that financial sector reforms are essential to ensure fiscal sustainability in the future. Although emerging market reforms undertaken in the aftermath of the financial crises […]

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