The predictive power of the yield curve slope, or the yield spread is well established in the United States (US) and European Union (EU) countries since 1998. However, there exists a gap in the literature on the predictive power of the yield spread on the Chinese economy. This paper provides a different leading recession indicator using the Chinese and US economy as comparative examples: the user cost spread, being the difference of the opportunity costs of holding government securities of different maturities. We argue that the user cost spread, based on the Divisia monetary aggregate data like the ones produced by the Center for Financial Stability, provides improved predictive ability and a better intuitive explanation based on changes in the user cost price of holding bonds.
British exit from the European Union would be a long, difficult and conflictual process. Greek exit from the euro would centre on a short, punctuated crisis. (Survival / SWP)
This article discusses the 2011 legislative election results in Portugal and the context in which they took place. After describing how the economic and financial crisis unfolded, leading to the European Union/International Monetary Fund bailout, it analyses the campaign strategies of the major parties. On the basis of a post-election survey, the article then discusses how successful these strategies were, and concludes by analysing the aftermath of the election in terms of government formation. Adapted from the source document.
In this paper we analyze different aspects of Croatian path to the monetary union and its current readiness to join the ERM 2 mechanism. Firstly, we present and discuss costs and benefits of euro adoption. Second, we use descriptive analysis to determine Croatia's current position in relation to convergence criteria and discuss the possible timing of Croatian accession to the ERM 2. Thirdly, we analyze experiences of two NMS peers, Slovenia and Slovakia, before and after joining ERM 2 and highlight key lessons for Croatian policy makers. As Croatia is highly euroised (high FX risk) small and open economy, strongly integrated in EA trade and financial chains, with limited possibilities of monetary policy, the benefits of euro adoption would outweigh all commonly mentioned costs. Regarding convergence criteria, the biggest obstacle of Croatian access to ERM 2 mechanism is the level of public debt but recent developments and adjustments of SGP suggest that Croatia could satisfy the adjusted fiscal criteria already in several years. Experiences of Slovenia and Slovakia show that determined steps towards the euro (primarily ERM 2) can serve as an important policy credibility anchor and put a positive pressure on policy makers to preserve internal and external stability of the country and implement various structural reforms in order to achieve convergence with the euro zone members. ; U ovom radu autori analiziraju različite aspekte pristupanja Hrvatske europodručju i ocjenjuju trenutačnu spremnost Hrvatske za ulazak u tečajni mehanizam ERM 2. Prvo, u radu se sažeto prikazuju potencijalni troškovi i koristi od uvođenja eura kao nacionalne valute. Drugo, koristeći metodu deskriptivne statistike, autori utvrđuju trenutačnu poziciju Hrvatske u odnosu na konvergencijske kriterije te određuju potencijalni (realističan) trenutak ulaska u tečajni mehanizam ERM 2. Treće, autori analiziraju iskustva usporedivih zemalja članica Nove Europe, Slovenije i Slovačke, prije i nakon ulaska u ERM 2 te ističu ključne pouke za nositelje politike u Hrvatskoj. Budući da je Hrvatska visoko euroizirana, mala, otvorena ekonomija, snažno integrirana u trgovinske i financijske tokove europodručja te da već ima ograničen suverenitet monetarne politike, u radu se zaključuje kako potencijalne prednosti uvođenja eura nadmašuju sve potencijalne troškove. Što se tiče konvergencijskih kriterija, najveća prepreka ulasku u ERM 2 predstavlja visoka razina javnog duga, ali nedavne izmjene Pakta o stabilnosti i rastu te uvođenje novog kriterija duga omogućavaju Hrvatskoj da zadovolji i novi kriterij duga u sljedećih nekoliko godina. Iskustva Slovenije i Slovačke pokazuju da odlučan put prema euru (prvenstveno boravak u ERM 2) može poslužiti kao važno sidro kredibiliteta ekonomske politike i potaknuti nositelje politike da očuvaju internu i eksternu stabilnost zemlje te implementiraju različite strukturne reforme kako bi ostvarili što veći stupanj konvergencije prema zemljama euro područja.
This study examines the potential drivers and their spatial components of inflation expectations of consumers in 22 European Union countries by using the spatial Durbin model. The potential determinants are drawn from the macrosphere (oil prices, food prices, house prices, industrial production), financial sphere (money market interest rates, nominal effective exchange rate, key policy rate), and economic favourable cognition variables (consumer confidence indicator, short-term inflation volatility, medium-term memory reversal of inflation expectations). The implemented binary spatial weight matrices are based on the geographical and economic distances. The economic distance weights define the European Union global trade partners as the most proximal neighbours. Our results confirm the existence of an inherent spatial component in short-term consumers' inflation expectations even when excluding effect of inflation rate anchoring. This finding may provide a possible explanation for disruptions found in monetary policy transmission mechanism in small and open economies. From other perspective, the more interlinked consumers' expectations may open the path to better business cycle synchronisation and strengthen the process of EA convergence, improving the conditions for efficient and effective monetary policy conduct.
The European Central Bank (ECB) has received a lot of criticism for its too little, too late performance to ease market pressures during the economic crisis. At the same time, the ECB and the Federal Reserve (FED) have managed the new economic realities that have emerged in the international context differently. Despite the criticisms, the European Central Bank is the European Union institution that has assumed more control due to the new model of economic governance of the EU. Why did the Federal Reserve act so nimbly and quickly to calm the markets, while the ECB was so cautious in managing monetary policy? The aim of this paper is to perform a comparative analysis of the management of interest rates and other monetary policy measures undertaken by the Central Bank and the Federal Reserve during the economic crisis, as well as to understand the changes in the context of the ECB and the emergence of its authority within the European Union's economic governance model since 2011. Thus, in order to carry out a scrupulous exposition, we will also limit the time frame of this study to the 2007-2014 period.
