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Begin New Search Political Geography United States of America Author Maria Demertzis

1. An analysis of central bank decision-making

Author:
Maria Demertzis, Catarina Martina, and Nicola Viegi
Publication Date:
07-2022
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
The process by which central banks take decisions has evolved over the years, with a tendency towards independence and decisions taken by committees rather than individuals. Monetary policy committees can be set up formally in different ways, traditionally falling into one of two categories: individualistic or collegial. Individualistic committees reach decisions by voting and publish the votes of each of their members, while in collegial committees, decisions are typically reached collectively. The European Central Bank is an example of the latter, while the Bank of England follows an individualistic approach. Focusing on decision-making, a relevant question is whether the formal set-up in practice leads to different ways of deliberating and reaching monetary policy decisions. We look at decisions taken by the Bank of England, the Federal Reserve and the European Central Bank over more than 20 years to evaluate how different the decision-making process is in these three central banks. The results indicate that, irrespective of the committee type, their approach to consensus building when they take decisions is similar. The three central banks seem to value reaching decisions by unanimity, both on interest rates – the prime monetary policy instrument by definition – and on asset purchases. Decisions to tighten monetary policy are more often taken unanimously than decisions to ease monetary policy. When maintaining policy unchanged, decisions are usually backed by most committee members.
Topic:
Federal Reserve, Finance, Central Bank, European Central Bank, Decision-Making, and Bank of England
Political Geography:
United Kingdom, Europe, Global Focus, and United States of America

2. Europe should not neglect its capital markets union

Author:
Maria Demertzis, Marta Dominguez-Jimenez, and Lionel Guetta-Jeanrenaud
Publication Date:
06-2021
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
The European Union’s capital markets remain very underdeveloped compared to the United States. The market for equity, as measured as the size of the total market capitalisation of listed domestic firms relative to GDP, is much larger in the US and in Japan than in Europe.
Topic:
European Union, GDP, and Capital Flows
Political Geography:
Japan, Europe, and United States of America

3. Low interest rates in Europe and the US: one trend, two stories

Author:
Maria Demertzis and Nicola Viegi
Publication Date:
03-2021
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
In both Europe and the United States, interest rates have been declining for more than fifteen years. For much of this period, real interest rates have been negative and they are expected to remain negative for at least another decade. The literature associates this decline in interest rates with a similarly protracted decline in productivity. But the decline in productivity appears paradoxical given major technological advances. The decline in the price of capital is underpinned by the factors that have caused a decline in demand for capital, as well as a relative increase in its supply. On the supply side, aging and an increase in overall macroeconomic risk since the financial crisis have both led to increased savings. On the demand side, the increase in the importance of intangible capital in production has reduced the demand for physical capital. Nevertheless, for the US, the literature has identified the increase in market concentration as the biggest factor responsible for the reduction in the overall demand for capital. Digital innovation has led to the creation of champion firms that have captured big market shares and have been able to prevent others from entering not only the US market, but markets globally. This has dampened investment. Europe is affected by US digital dominance, but other factors, including aging and increased risk, are more prominent in sustaining the downward pressure on interest rates. In particular, the lack of risk capital, in the context of capital markets, contributes to this downward pressure in the EU. As the knowledge economy relies increasingly on intangible capital, a bank-based system that requires collateral is not well suited to finance investments. A lack of suitable finance will remain an important factor in the downward pressure on interest rates. The structural factors behind the downward pressure on interest rates imply that macroeconomic policy will have a reduced role in managing aggregate demand. Monetary policy in the euro area will be more about preventing financial fragmentation and less about stimulating demand. Equally, fiscal policy will have more of a supporting rather than stimulating role. Tackling the structural decline in market dynamism and therefore in real rates will require structural policies to reduce market power globally and ensure the creation of capital markets in the EU.
Topic:
Monetary Policy, Governance, European Union, Finance, and Macroeconomics
Political Geography:
Europe, North America, and United States of America

4. 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 Relations, and Political stability
Political Geography:
Europe and United States of America