Author Archives: ADEMU

ADEMU final conference – a detailed review


June 18, 2018

Ademu’s final conference took place at the European University Institute in Florence on the 9th   and 10th May 2018. During the conference, the results of the three-year Horizon 2020 project were debated and analysed by Ademu coordinators and esteemed economists, academics and legal experts. Gergő Motyovszki and Jan Teresiński have provided a detailed review of the proceedings.

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A new fiscal and monetary framework for the EMU? The EU presidents’ roadmap in 2018


In December 2012, almost in the midst of the euro crisis, Herman. Van Rompuy, in collaboration with three other presidents of the EU, traced out a roadmap “Towards    a genuine Economic and Monetary Union” (Van Rompuy et al. 2012), which was  then followed by the Five Presidents’ Report in June 2015 (Juncker et al. 2015), and subsequently further discussed and developed by the European Commission (2017a, 2017b, 2017c). This chapter provides a short (personal) assessment of this roadmap, mostly based on the experience of these years and the research of the Horizon 2020 ADEMU project, which started with this aim in June 2015. It concludes with a proposal to strengthen the Economic and Fiscal Union (see Chapter 2 of this eBook). By Ramon Marimon, European University Institute, UPF – Barcelona GSE and CEPR. Continue reading

The political economy of policy implementation


As we have seen during the Greek crisis, for example, the Economic and Monetary Union is heavily influenced by political concerns and issues. Tools for studying the impact of political concerns on the EMU are inadequate.1 The work of ADEMU in  the area of political economy has been to develop the theory needed to deal with these issues. In this chapter, we lay out some of the main concerns and questions and indicate how ADEMU’s political economy research has created a framework for addressing them. We focus on rent seeking in the banking sector. By David K. Levine and Andrea Mattozzi, European University Institute. Continue reading

The European Stability Mechanism: The path to reform


While the European Stability Mechanism can be credited for having played a vital role in safeguarding the financial stability of the euro area and of its member states, thus discharging its mandate (Article 12(1) ESM Treaty), its design and operation have not escaped criticism:

  • first, as an international treaty it lacks the usual accountability channels found in EU law, for example bypassing the European Parliament;
  • second, the conditions attached to its loans attracted criticism for harming fundamental rights of EU nationals and eroding national democracies;
  • third its governance structure gave large member states blocking votes, causing resentment about its operation;
  • finally, the linkage with the IMF caused some friction with the EU

By Giorgio Monti, European University Institute Continue reading

Financial stability: The role of macroprudential policies


The belief held during the period of the Great Moderation that macroeconomic stability could be attained by monetary policy has been replaced by a growing consensus on the crucial role of macroprudential policies. The main goal of macroprudential policies   is to promote financial stability by limiting excessive risks and vulnerabilities in the financial system. Macroprudential policies inherently represent a trade-off between efficiency and welfare losses ex ante in good times and the gains ex post should a crisis arise. Analysis of this trade-off has been the focus of research in the ADEMU project. By Radim Boháček, CERGE-EI, Charles University, Prague. Continue reading

Hugo Rodríguez Mendizábal

Banking Union and the ECB


Since the creation of the euro area, price stability has been the primary objective of the  European System of Central Banks (ESCB), with the Eurosystem and the ECB,  as its core institutions, being responsible for the implementation of monetary policy. However, the recent financial and euro crises have highlighted a secondary mandate  of the ESCB as one of the EU priorities, namely, the prudential supervision of credit institutions and the stability of the financial system.3 Accordingly, a new legislative wave  has endowed the ECB with additional powers regarding banking supervision.4  In addition, decisive steps have been taken in developing a new set of institutions, embedded in the European Banking Union, to contribute to the fulfilment of this second mandate. By Hugo Rodriguez, Instituto de Análisis Económico (CSIC), MOVE and Barcelona GSE. Continue reading

Reassessing tax policies and tax coordination: The case for a tax on automation


One of the fiscal challenges in Europe, as in the rest of the developed world, is how to deal with the social impact of widespread automation. How can we make sure that the benefits from innovation in automation and artificial intelligence are not confined to only a few? Automation threatens to destroy many of our jobs:; this may be a reason to tax robots, the intermediate goods that are associated with automation, and artificial intelligence. Both the impact of automation on the job market in Europe, and possible policy remedies, have been discussed in different forums (e.g. McKinsey&Company 2017), and also in the European Parliament. By Pedro Teles, Catolica Lisbon School of Business & Economics, Banco de Portugal and CEPR. Continue reading

Stimulus packages? Better be persistent!


The financial and euro crises have reignited interest in whether fiscal stimulus is an effective policy to bring the economy back on trend. We show that the answer to this question crucially depends on how persistent the fiscal policy is. The interplay between expectations regarding future government spending and capital accumulation deeply affect the size of fiscal multipliers. By Martial Dupaigne and Patrick Fève, Toulouse School of Economics  Continue reading

Macroeconomic stabilisation in heterogeneous societies


ADEMU has been heavily engaged in developing new models for macroeconomic stabilisation which combine frictions in goods and labour markets, typically stressed in the monetary economics literature, with incomplete asset markets, stressed in the literature that has considered distributional issues. When these features are combined, new implications arise for macroeconomic stabilisation. This chapter reviews some of these issues and argues that stabilisation policy is particularly important in the face   of idiosyncratic risk and incomplete markets because of the amplification that can arise through countercyclical earnings risk, and because of a new source of interaction between monetary and fiscal policies. By Morten O. Ravn, University College London, CEPR and Centre for Macroeconomics Continue reading