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2. An effective economic response to the Coronavirus in Europe
- Author:
- Maria Demertzis, André Sapir, Simone Tagliapietra, and Guntram B. Wolff
- Publication Date:
- 03-2020
- Content Type:
- Policy Brief
- Institution:
- Bruegel
- Abstract:
- 'Whatever it takes' needs to be the motto to preserve lives and reduce the impact on the economy of the epidemic.
- Topic:
- Governance, Economy, Central Bank, Macroeconomics, and COVID-19
- Political Geography:
- Europe
3. The next generation of digital currencies: in search of stability
- Author:
- Gregory Claeys and Maria Demertzis
- Publication Date:
- 12-2019
- Content Type:
- Policy Brief
- Institution:
- Bruegel
- Abstract:
- Four major developments have challenged the status quo and reopened the debate on the forms that money will take in the future: 1) use of cash as a medium of exchange has declined; 2) distributed ledger technology (DLT) has led to the emergence of thousands of digital cryptocurrencies; 3) some global tech giants are planning to provide private digital currencies to their billions of users in the form of stablecoins; and 4) in turn, public authorities are thinking about providing their own digital currencies to the general public. These developments raise questions about the implications for financial stability, the transmission of monetary policy and financial intermediation. This Policy Contribution focuses on the consequences stablecoins and central bank digital currencies could have. Stablecoins, such as Facebook’s Libra, differ from earlier generations of cryptocurrencies in three fundamental ways. First, they would start with large networks of users and global accessibility, two pivotal features for the critical uptake of a new currency. Second, given the current limitations of DLT, including in terms of energy efficiency, new stablecoins would rely on (more) centralised systems to validate transactions. Third, stablecoins would focus particularly on reducing the volatility in the value of the new currency. These new features of stablecoins attempt to correct some of the critical deficiencies identified in first-generation cryptocurrencies, which meant they did not acquire the main functions of money. However, new stablecoins raise other questions and potentially create new problems. One issue could arise from the more centralised (permissioned) validation system, which could lead to collusion problems. Another issue could arise from the reserve system that is supposed to ensure the stability of stablecoins, such as Libra, which could be incompatible with the profit maximisation behaviour of a private issuer. Facebook’s Libra plan has been a wake-up call to central banks and governments which, afraid of losing their monetary sovereignty, have renewed their interest in central bank digital currencies (CBDCs) as a potential solution. CBDCs could make private digital currencies less attractive and slow down their adoption. But there are other reasons to give the general public access to central bank liabilities. One important reason to provide CBDCs to citizens is that if cash disappears, citizens will lose direct access to sovereign money. Another benefit of the introduction of CBDCs is that monetary policy could be strengthened by transmitting it directly to the general public. However, the introduction of CBDCs could also be disruptive and create risks. In particular, CBDCs could have major consequences for financial intermediation. These risks would have to be evaluated by policymakers before any decisions are taken. If CBDCs are introduced, central banks would have to carefully calibrate their properties to minimise these risks. But, eventually, if these risks – and in particular the risk of structural financial disintermediation – do materialise, central banks would have various instruments to counter them.
- Topic:
- Science and Technology, Central Bank, Currency, Cryptocurrencies, and European Parliament
- Political Geography:
- Europe
4. A strategic agenda for the new EU leadership
- Author:
- Maria Demertzis
- Publication Date:
- 06-2019
- Content Type:
- Special Report
- Institution:
- Bruegel
- Abstract:
- Memo to the presidents of the European Commission, Council and Parliament. 'A strategic agenda for the new EU leadership' by Maria Demertzis, André Sapir and Guntram Wolff is the first of our 2019 Bruegel memos to the new presidents of the European Commission, Council and Parliament. Focusing on the most important economic questions at EU level, these Bruegel memos are intended to be a strategic to-do list, outlining the state of affairs that will greet the new Commission
- Topic:
- International Relations and International Affairs
- Political Geography:
- Europe
5. State contingent debt as insurance for euro-area sovereigns
- Author:
- Maria Demertzis and Stavros Zenios
- Publication Date:
- 04-2018
- Content Type:
- Working Paper
- Institution:
- Bruegel
- Abstract:
- Since the financial crisis, EU countries' economies have recovered to the point that they are exiting their adjustment programmes. Institutional stability mechanisms have been improved at the European level, with the promotion of the banking union and the establishment of a European Monetary Fund, for instance. However, the authors argue that such crisis contingencies should include markets in their risk-sharing, which would require better coordination with institutions.
- Topic:
- International Political Economy
- Political Geography:
- Europe
6. Fundamental uncertainty and unconventional monetary policy: an info-gap approach
- Author:
- Yakov Ben-Haim, Maria Demertzis, and Jan Willem Van Den End
- Publication Date:
- 02-2017
- Content Type:
- Working Paper
- Institution:
- Bruegel
- Abstract:
- This paper applies the info-gap approach to the unconventional monetary policy of the Eurosystem and so takes into account the fundamental uncertainty on inflation shocks and the transmission mechanism. The outcomes show that a more demanding monetary strategy, in terms of lower tolerance for output and inflation gaps, entails less robustness against uncertainty, particularly if financial variables are taken into account. Augmenting the Taylor rule with a financial variable leads to a smaller loss of robustness than taking into account the effect of financial imbalances on the economy. However, in some situations, the augmented model is more robust than the baseline model. A conclusion from our framework is that including financial imbalances in the monetary policy objective does not necessarily increase policy robustness, and may even decrease it
- Topic:
- Economics, International Political Economy, and International Trade and Finance
- Political Geography:
- Europe
7. Europe in a new world order
- Author:
- Maria Demertzis, André Sapir, and Guntram Wolff
- Publication Date:
- 02-2017
- Content Type:
- Policy Brief
- Institution:
- Bruegel
- Abstract:
- The United States is the European Union’s most important trade and bilateral investment partner, which has, until now, supported a multilateral trade system and European integration and has provided a security guarantee to the countries of the EU. But like other advanced economies, the US’s relative weight in the global economy has declined. The new US administration seems intent on replacing multilateralism with bilateral deals. In trade, it aims to secure new trade deals in order to reduce bilateral trade deficits and to protect, in particular, the US manufacturing sector. In climate policy, the US commitment to the Paris Agreement is being questioned. In defence, the security umbrella appears less certain than previously. The overall promise behind this change of direction is to put ‘America first’ and deliver better results for US citizens.
- Topic:
- International Political Economy, International Trade and Finance, Bilateral Relations, Multilateral Relatons, and Political stability
- Political Geography:
- Europe and United States of America