This paper proposes a two-step, market-based approach to debt reduction: Step 1. The European Financial Stability Facility (EFSF) would offer holders of debt of the countries with an EFSF programme (probably Greece, Ireland and Portugal = GIP) an exchange into EFSF paper at the market price...

This Policy Brief argues that too much effort and political capital is being spent by the Commission and member states on being seen to be doing something quickly about youth unemployment when, in fact, the structural measures proposed will only have long-term effects. Expectations of immediate...

In this new Policy Brief, CEPS Director Daniel Gros argues that the 13 November announcement of the European Commission that Germany is running an excessive current account surplus appears to be much ado about little. All the Commission can, and will, do is to start an ‘in depth analysis’....

Since the onset of the debt crisis in late 2009, the comparisons between Greece and Argentina have multiplied, with an emphasis more on the similarities than the differences. This is not surprising given the stunning parallels. This Commentary draws a systematic comparison between the two...

Two of the four macroeconomic adjustment programmes, Portugal and Ireland’s, can be considered a success in the sense that the initial expectations in terms of adjustment, both fiscal and external, were broadly fulfilled. A rebound based on exports has taken hold in these two countries, but a...

The literature on dual exchange rate regimes assumes that the separation between the two foreign exchange markets is perfect. In this paper a divergence between the two exchange rates induces a flow of arbitrage activity, the magnitude of which depends on both the costs of evading exchange...

Many small countries that export primary commodities are subject to large and unpredictable fluctuations in their export earnings. Adjustment to these fluctuations in export earnings usually requires changes in relative prices such as the real wage rate and the real exchange rate. In many of...

This paper uses Krugman's (1980) model of trade with product differentiation and monopolistic competition to examine the effects of various protectionist measures with and without retaliation. The main results are as follows. Diversity (the number of products available to consumers) will not be...

The long-run ineffectiveness of quantitative capital controls is demonstrated with a model in which economic agents can evade controls by incurring costs at the time that capital is transferred. Differentials between domestic and off-shore interest rates, as well as expectations about future...

In the past few years, several countries have implemented rules that seek to adjust the nominal exchange rate in such a way as to prevent losses of competitiveness. Although the manner in which these rules have been implemented has varied among countries, exchange rate adjustments have typically...