Recent commentary has highlighted the fact that a Greek debt default would be a disaster for ECB policy-makers given the central bank's exposure to losses based on its past and prospective activities as the Euro area lender of last resort (LOLR). A 50% write-off on the value of Greek bonds would impose significant capital losses on the ECB, which p

I am currently giving a short course for summer school students at Oriel College. The lectures address recent important events in the world economy and the challenges that they pose for policy-makers. The topics include some thoughts on fiscal policy and the appropriate speed of fiscal consolidation, the Chinese trade surplus and global demand imba

There have been a number of recent contributions making the case for QE3 in the United States following weak employment and GDP numbers. Recent market reactions to Bernanke's efforts to distance the Fed from a further round of quantitative easing prompted a sharp reversal in financial markets this week, suggesting investors had priced in a further

The Bank of England's decision to resume quantitative easing through a further £75bn of asset purchases is a necessary step forward in an economy in which the outlook for private, government and foreign demand is bleak. In order for the move to have a meaningful impact on expenditure and growth prospects it is important that government plans to en

I will not be doing any posts for the next few weeks due to various teaching commitments. During the second half of May I plan to write up some thoughts on (i) the UK fiscal position, including some arguments for reducing the speed of fiscal tightening; (ii) suggestions for monitoring the composition of global imbalances in saving and borrowing as

After reading Marvin Goodfriend's excellent JME article on Fed policy during the crisis I need to update an earlier post on how QE relates to conventional open market operations (OMOs) . In that piece I noted that traditional OMOs keep the size of the central bank balance sheet constant and support financial market liquidity via cash injections fin

A key feature of credit markets in the aftermath of the credit crunch has been extreme inequality in access to credit. Large corporations or relatively high net worth individuals perceived to have 'skin in the game' thanks to large amounts of loss absorbing capital have been able to fund themselves and often on favourable terms due to the effects o

The Federal Reserve has announced plans to implement Operation Twist over the next 10 months. During that time the Fed will use proceeds from sales of Treasury debt with less than three years to maturity to re-invest in longer maturity Treasury bonds. Additionally, to add a twist to its holdings of non-Treasury liabilities, the funds from maturing

During the last couple of weeks there have been conflicting assessments of the priorities for income tax cuts in the UK. A group of economists argued for scrapping the 50p top rate on the grounds that it is undermining national competitiveness and growth prospects. Others, including many Liberal Democrats, have argued for reducing the incidence of

As the search for a solution to the debt crisis affecting Greece and other European countries continues it's natural to ask exactly what part the constraints associated with monetary union have played in the origins and propagation of the crisis, and what options Greece would now be pursuing if it faced its current financing problems but exercised