International and national institutions, banks, governments and others provide growth forecasts, whose publication or announcement is impatiently expected and carefully analyzed. On June 2013, the World Bank forecast a 2,2% world growth for 2013 while IMF forecast it on October 2013 to reach 2,9% the same year, that is 2 pp. lower than its forecast two years earlier. Forecasts are often revised, upwards or downwards. But do forecasts really matter and why? How to explain that forecasts vary according to the different sources? Does the difference between forecasts and reality have economic consequences? Those questions will be addressed in the following article.

16/3/14

Recent sovereign debt restructurings highlighted the need for more adequate resolution frameworks. It is fair to say that the current global architecture for sovereign debt restructurings, which has developed since the late 1990s through a mix of market-based and contractual tools, has worked reasonably until now. However, it does not eliminate potential collective action problems in the short run, nor does not protect from moral hazard or provides enough incentives to prevent overborrowing ex-ante.

5/5/14

In this paper we outline some developments that led discussions on the future of the IMS to restart, and we focus on the question of reserve currencies in a post-crisis system. We argue that the new fundamental structure of the world economy makes the dollar-centered system obsolete and requires a shift towards a multi-polar monetary system, with several reserve currencies operating on par. While the question of viable alternatives to the greenback remains, we advocate for increased policy coordination in the transition process.

4/23/14

Events since May 2013 have revealed the under-appreciation of risks in emerging markets. The increase in volatility of global capital flows – triggered by the Federal Reserve’s “tapering talk” and “tapering start” – illustrates the fact that foreign investors are awakening to EM risk aversion, after years of cheap and abundant liquidity. Because their growth prospects are hampered by structural and political issues and because interest rates in the U.S. are expected to rise by spring 2015, emerging economies are at risk of new exchange rate turmoil if central banks do not start to coordinate or if a clear international monetary framework is not put in place.

4/16/14

While the financial fragmentation is in the spotlight, employment fragmentation should also be tackled by the EU. The crisis has exacerbated imbalances on the labor market in the Eurozone.

3/18/14

The gap between north and south Europe worsened with the crisis. Are there any solutions to bring back a sucessful convergence process? A fiscal union might be the long-term solution, and in the short-term, a credit easing for the south might work.

3/18/14

A strong ECB within the banking union will create a solid foundation for the Eurozone in the long term. In the short term, especially as backing for the SRM hangs in limbo, the ECB can provide an injection of credibility for which the system is long overdue.

2/11/14

In addition to the foreseeable systemic risks, which will likely arise from a change toward less accommodative monetary policies, there will also be further long-term structural impacts to be addressed. These will force economic agents, and more particularly Central Banks, to reassess their role and their tools of intervention.

2/6/14

The overall economic situation in Europe is weak. Is austerity a good plan for the future of Europe? It is hard to say. However, it is certain that a middle way is needed. 

1/28/14

Union has become a one-size-fit-all term to add bricks and complete an imperfect monetary union in the Eurozone—fiscal union (for tools to deal with asymmetric shocks), banking union (to avoid fragmentation and negative feedback loops between banks and sovereigns), political union (to embed legitimacy in economic decision making). Yet the weakest link may come from one missing brick: why not have a labor union to cope with high unemployment in the EU?

5/24/13

Should we be wary of the financial interconnectedness in the euro area when the current debate is about the danger of fragmentation? With the crisis, banks retreated into their own domestic markets—as an increase in risk and uncertainty broke down financial flows and operations across countries. However, over recent decades, an integrated global system helped poorer economies narrow somewhat the income gap with richer ones.

4/26/13

In the big scheme of things, a possible decrease in external aid appeared secondary in the negotiations for the 2014-20 Multiannual Financial Framework, itself small compared to the size of the European Union (EU). With hardship imposed domestically, support for external assistance is at risk. However, reasons to protect external aid from austerity are compelling—budgetary gains would be marginal yet negative growth spillovers, and human impact in poor countries could be large. A recent UN report stresses that a significant decrease in aid could threaten the Millennium Development Goals.

3/21/13

The recent financial and economic crisis raised fundamental questions about the role of governments. Nowadays, it’s again believed that markets, when left to themselves, inevitably create excessive disturbances… calling for a new role of the State.During the crisis, while the regulatory roles of States increased dramatically, this was not associated with greater credibility. We find a paradox between the immense expectations on what States can achieve and the loss of credibility for their actions. First of all, we highlight the role of states in the pre- and post- crisis period, and then probe the missed opportunity to change the paradigm.

3/8/13

For the last three years, Eurozone countries have been striving to confront a complicated set of issues : the direct consequences of the 2008 financial crisis, the indirect consequences of the same on growth and government balances, and then the home-grown euro crisis, spreading from the periphery to the core of the monetary zone. ​In response to these challenges,​ governments adopted institutional reforms and cooperation mechanisms at a breath-taking and unprecedented pace, ​aiming not only at resolving short-run, crisis-driven challenges, but also at addressing the deeper frailties of the eurozone.

3/1/13

While policy makers are still grasping with the euro area crisis, what lessons can be drawn from its causes—to avoid sawing today the roots of further vulnerabilities. Donald Rumsfeld’s famous distinction between known unknowns and unknown unknowns provides a useful framework, though possibly one other category needs to be added for the eurozone: the known knowns. The eurozone crisis provides an opportunity, by revealing some of the unknowns, but the past tells us that knowns do not necessarily result in effective policy actions.

2/21/13

Budget cuts, unemployment, slowdown in economic activity—there seems to be no room for much optimism in the European continent. The one expanding sector is the informal economy, with evidence of a direct relationship with the economic climate: a thriving official economy reduces incentives to participate in shadow activities.

2/2/13

Models in economics are fundamental. Created in order to understand the mechanisms that rule our world, they strongly contribute to the decisions taken by politicians, policymakers, institutions,producers and others. One of their main contributions comes from their capacity to forecast the future. But after the failure to predict the economic and financial crisis, it is legitimate to question the accuracy of models.

11/18/12

Economies around the world are struggling with deep confidence crises, looking up to economists for long-gone silver bullets. Yet economists are facing their own confidence crisis: how to prove their worth when they vouched for complacent policies that resulted in massive economic and financial disruptions, when they are at a loss for providing policy prescriptions? As the crisis deepens and drags on, so does our distrust in the economic profession.

11/9/12