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on European Economics |
| By: | Basu , Kaushik; Stiglitz, Joseph E. |
| Abstract: | As the Eurozone crisis drags on, it is evident that a part of the problem lies in the architecture of debt and its liabilities within the Eurozone and, more generally, the European Union. This paper argues that a large part of the problem can be mitigated by permitting appropriately-structured cross-country liability for sovereign debt incurred by individual nations within the European Union. In brief, the paper makes a case for amending the Treaty of Lisbon. The case is established by constructing a game-theoretic model and demonstrating that there exist self-fulfilling equilibria, which would come into existence if cross-country debt liability were permitted and which are Pareto superior to the existing outcome. |
| Keywords: | Debt Markets,Access to Finance,Banks&Banking Reform,Bankruptcy and Resolution of Financial Distress,Economic Theory&Research |
| Date: | 2013–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:6555&r=eec |
| By: | Michalis Nikiforos; Laura Carvalho; Christian Schoder |
| Abstract: | The paper discusses the trajectories of the Greek public deficit and sovereign debt over the last three decades and its connection to the political and economic environment of the same period. We pay special attention to the causality between the public and the foreign deficit. We argue that from 1980 to 1995 causality ran from the public deficit to the foreign deficit, but that due to the European monetary unification process and the adoption of the common currency, causality has reversed since. This hypothesis is tested and verified econometrically using both Granger Causality and Cointegration analyses. |
| Keywords: | Greece, crisis, public debt, twin deficits, imbalances |
| JEL: | E62 F21 F34 F41 |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_771&r=eec |
| By: | C.J. Polychroniou |
| Abstract: | Research Associate and Policy Fellow C. J. Polychroniou argues that a political solution based on a new economic vision is needed to bring an end to the Greek crisis. Polychroniou observes that what began as a financial crisis has been transformed into a full-fledged economic and social crisis by the neoliberal policies of the International Monetary Fund and the European Union (EU). Instead of growth, these policies have destroyed Greece's economy, divided the eurozone states, and hobbled a fragile global recovery. The past six years have seen Greece's descent into economic and social ruin. Exiting the current crisis, for Greece and countries throughout the eurozone, requires more than an end to austerity. Broadly, EU institutions must be radically restructured around the principles of sustainable, equitable growth. Specifically, Greece needs a comprehensive development plan, with massive public spending and investment. |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:lev:levypn:13-06&r=eec |
| By: | Mirdala, Rajmund |
| Abstract: | One of the key outcomes of open economy macroeconomics refers to a crucial importance of an investment-saving relation affecting a current account determination. However, despite a relative diversity in exchange rate regimes in European transition economies, there is still a substantial potential to analyze price effects of real exchange rate dynamics on current account adjustments. Rigorous investigation of relative changes in real exchange rates leading paths and associated adjustments in current accounts may reveal causal relationship between real exchange rate dynamics and international competitiveness in order to observe its redistributive effects. This purpose is even more significant provided that economic crisis has intensified cross-country expenditure shifting effects that still provide quite diverse and thus spurious effects on current account adjustments. In the paper we analyze main aspects of current account adjustments in European transition economies. Our main objective is to observe a relationship between real exchange rate dynamics and current account adjustments (in countries with different exchange rate arrangements). From estimated VAR model we calculate responses of the current account to the real exchange rate (REER calculated on CPI and ULC base) shock. To provide more rigorous insight into the problem of the current account adjustments according to real exchange rate dynamics we estimate the model for each particular country employing data for two subsequent periods 2000-2007 and 2000-2012. |
| Keywords: | current account adjustments, real exchange rate dynamics, economic growth, economic crisis, vector autoregression, impulse-response function |
| JEL: | C32 F32 F41 |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:48901&r=eec |