Italian banks are in a precarious situation, burdened by non-performing loans (NPLs) that are almost of the same magnitude as their capital and provisions. The gradual approach of dealing with NPLs via more provisioning and some sales has yielded little results. The political crisis now gives an...

The importance of monetary policy for the current ultra-low interest rates is often over-estimated. As emphasised by ECB President Draghi himself, monetary policy cannot determine long-term rates directly, and its influence on long-term real rates is even more limited and indirect.Moreover,...

Adjustment to an external imbalance is more difficult within a monetary union if wages are sticky. Periods of high unemployment are usually necessary to achieve the required real depreciation (internal devaluation). Gradual adjustment is usually recommended to distribute the output and...

Negative rates have invalidated the normal business model of central banks, which consists of issuing zero-interest bearing cash as liabilities and earning a return on their assets (the resulting profits are called “seigniorage”). But many central banks are now earning a negative rate on...

The European Commission awarded a contract in November 2005 to a consortium composed of the TARKI Social Research Institute (Hungary), CASE, Center for Social and Economic Research (Poland) and CEPS to analyse the socio-economic developments and the process of structural reforms in what were...

The main message of this contribution is that lean times are here to stay for the old member states. The main reasons are deep seated: Deteriorating demographics continue with ratio of working age population to total population falling. There are thus fewer and fewer producers for every consumer...

It is widely assumed that a common currency makes it desirable to have also a common fiscal policy. However, if fiscal policy is a source of shocks, independent national fiscal policies are generally preferable because they allow for risk diversification

The paper analyzes the importance of credible institutions in the process of trade liberalization. It combines aspects of credible policy announcements with adjustment costs. We show that if industries' profits are subject to adjustment costs, a dynamic link between periods arises that creates...