Did quantitative easing affect interest rates outside the US? New evidence based on interest rate differentials. CEPS Working Document No. 416/January 2016

This paper explores the effects of non-standard monetary policies on international yield relationships. Based on a descriptive analysis of international long-term yields, we find evidence that long-term rates followed a global downward trend prior to as well as during the financial crisis. Comparing interest rate developments in the US and the eurozone, it is difficult to detect a distinct impact of the first round of the Fed’s quantitative easing programme (QE1) on US interest rates for which the global environment – the global downward trend in interest rates – does not account. Motivated by these findings, we analyse the impact of the Fed’s QE1 programme on the stability of the US-euro long-term interest rate relationship by using a CVAR (cointegrated vector autoregressive) model and, in particular, recursive estimation methods. Using data gathered between 2002 and 2014, we find limited evidence that QE1 caused the break-up or destabilised the transatlantic interest rate relationship. Taking global interest rate developments into account, we thus find no significant evidence that QE had any independent, distinct impact on US interest rates.

Getting the most from public R&D spending in times of budgetary austerity. Bruegel Working Paper 2016/01, February 2016

This working paper reviews the evidence on the impact of public R&D spending. The authors first look at the evidence from micro-analysis of the impact of public intervention on private R&D and innovation, with a focus on the latest results from crosscountry micro-research performed within SIMPATIC. To analyse the impact of public R&D on growth, the micro-results on private R&D investment effects are complemented with a macro-perspective. To this end, the authors look at how public R&D performs in affecting GDP growth and jobs in applied macro-models most commonly used in EU policy analysis. They focus particularly on the NEMESIS model in development within the SIMPATIC project. The authors conclude with some policy recommendations from the reviewed micro and macro SIMPATIC evidence for designing public R&D projects and programmes.

How to get out of the crisis without reforms? The Belarusian authorities confront growing economic problems. OSW Commentary NUMBER 202/21.03.2016

2015 saw a drop in Belarus’s GDP for the first time in almost 20 years, which is primarily the result of a significant reduction in levels of production and export. As a consequence, there was also a serious depletion of the country’s foreign exchange reserves, as well as a progressive weakening of the Belarusian rouble. The macroeconomic figures from January and February 2016 show that these trends are not only continuing, but they are also becoming even more severe, which confirms that Belarus now finds itself in a prolonged economic crisis. On one hand, the reason for this state of affairs is the protracted economic recession in Russia, which is Belarus’s main economic partner, together with the drastic global decline in prices for fuel, which is a key Belarusian export. On the other hand, meanwhile, an equally important reason for the current crisis is the failure of the Belarusian economic model. President Aleksandr Lukashenko, out of fear that his authoritarian system of government will be dismantled and that public discontent will rise, has categorically rejected the proposals for even partial reforms put forward by some of his entourage, who are aware of the need for the immediate transformation of the country’s anachronistic and very costly economic model, based as it still is on quasi-Soviet management policies.

Business under supervision – pathologies serving the system of power in Russia. OSW COMMENTARY NUMBER 212 | 31.05.2016

The relations between Russia’s authorities and business circles are subordinated not so much to rational economic calculations as to the interests of political elites. The key interest in this case is maintaining the current model of government. The formal and informal supervision of business by law enforcement agencies is an important element of Russia’s economic reality. Despite the rhetoric of high-ranking officials, intended to suggest that the state is taking care of businesspeople’s interests, it is evident that there is no will to devise a systemic solution to the most urgent problems, including the state institutions’ disrespect for the rights of ownership.