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The outbreak of the COVID-19 crisis has triggered a new wave of uncertainty, which may amplify the negative effect of the crisis. Based on several uncertainty measures, we show that inflation in the euro area is negatively affected by higher uncertainty. However, uncertainty does not impair the transmission of monetary policy. Consequently, the ECB should consider uncertainty in its reaction function in order to fulfil its mandate. This document was provided by the Policy Department for Economic ...

This paper shows how the Macroeconomic Imbalances Procedure (MIP) could be streamlined and its underlying conceptual framework clarified. Implementation of the country-specific recommendations is low; their internal consistency is sometimes missing; despite past reforms, the MIP remains largely a country-by-country approach running the risk of aggravating the deflationary bias in the euro area. We recommend to streamline the scoreboard around a few meaningful indicators, involve national macro-prudential ...

Inflation in advanced economies is low by historical standards but there is no threat of deflation. Slower economic growth is caused by supply-side constraints rather than low inflation. Below-the-target inflation does not damage the reputation of central banks. Thus, central banks should not try to bring inflation back to the targeted level of 2%. Rather, they should revise the inflation target downwards and publicly explain the rationale for such a move. Risks to the independence of central banks ...

The European Central Bank's (ECB) main objective is stable inflation in the Economic and Monetary Union (EMU). During the financial crisis, the ECB decided to face the economic slump by, amongst other actions, increasing and then decreasing interest rates and the money supply. In addition, it launched a quantitative easing (QE) programme which aims to stabilise some Member State economies. The ECB's monetary decisions evoked mixed reactions in the euro area and triggered a debate on the relevance ...

The possibility of deflationary periods occurring in the world's most advanced economies is being signalled by many commentators. The effects of deflation on an economy depend on whether the deflation is caused by falls in demand or rises in productivity. The former is essentially detrimental to economic growth and may, in a worst case scenario, develop into a hard-to-break, self-reinforcing deflationary spiral, whereas the latter is believed to be conducive to economic growth. Economists remain ...

Recent Trends in EU Energy Prices

Detaljna analiza 19-12-2014

This paper was prepared by Policy Department A at the request of the Industry, Research and Energy Committee (ITRE). Energy prices became more volatile and fell dramatically due to economic, political and structural changes to the economy. Lasting lower prices will spur global- and EU-wide economic growth. Gas, electricity, and oil product prices move in parallel, albeit with some delay, and with large differences across EU Member States and commodities. Furthermore, the recent fall was in several ...

This briefing provides a summary of a workshop on the experiences with the current economic governance framework in the European Union (EU) held in European Parliament on the request of the Economic and Monetary Affairs Committee. The aim of the workshop was to provide expertise in the context of preparation of the INI report on stocktaking and future challenges in economic governance (Rapporteur Pervenche Bérès). The workshop focused on "stocktaking" as regards the current economic governance framework ...

This in-depth review presents the fiscal and macro-structural challenges and policy recommendations for the Euro Area and its Member States under the 2014 Semester Cycle.

The euro area economic situation appears stabilized as concerns about the future of the common currency vanish. Fiscal consolidation may have been the very reason why the euro area debt crisis was overcome, but implicit debt mutualisation is a much convincing explanation. Despite this significant improvement, euro area economies have still to recover from the crisis. 2013 Country Specific Recommendations propose a way out of the crisis, mainly based on structural reforms and the continuation of fiscal ...

Most of the country-specific recommendations (CSRs) of 2012 and 2013 concentrated on the need to reduce budget deficits and to increase competitiveness. This was particularly the case for the euro area periphery. These two policy goals remain appropriate, but the CSRs failed to recognise the trade-off between them, especially concerning countries that have accumulated large external imbalances and now require a significant adjustment in wages and prices. Internal devaluation will improve competitiveness ...