50 years of the ‘twin engine’. Franco-German reconciliation, European integration and reflections for Asia. EU Centre Singapore Background Brief No. 8, March 2013

On 22 January 2013, French President François Hollande and German Chancellor Angela Merkel gathered in Berlin to celebrate the 50th anniversary of the signing of the Élysée Treaty, the document that ended centuries of rivalry and warfare between their two countries. It is all too easy to forget the importance of Franco-German reconciliation. The 1950 Schuman Declaration, which led to the creation of the European Union’s (EU) predecessor, the European Coal and Steel Community (ECSC), sought to render the prospect of war between France and Germany ‘not only unthinkable but materially impossible’. Over 60 years later, when the EU was awarded the Nobel Peace Prize, the Norwegian Nobel Committee noted that indeed, ‘war between Germany and France is unthinkable’. Halfway around the world in Asia, the other theatre of World War II, tensions between China and Japan have arisen, with Taiwan and South Korea also in the fray. Nationalist movements in these countries have grown. This background brief lays out the issues for a timely reappraisal of the applicability, or otherwise, of the European integration and reconciliation processes to East Asia. The brief seeks to outline the contours of the historic act of Franco-German reconciliation, and its consequences ever since. Starting from a brief look at the history of rivalry and war between the two countries, the brief examines the events leading to the signing of the Élysée Treaty in 1963, and the development of Franco-German exchanges that have cemented the relationship. Difficulties between the countries are also raised. A timescale analysis of the opinion of the two publics is considered, as a measure of the success of Franco-German reconciliation.

Bertrand Competition with an Asymmetric No-discrimination Constraint. Bruges European Economic Research (BEER) 23/June 2012

Regulators and competition authorities often prevent firms with significant market power or dominant firms from practicing price discrimination. The goal of such an asymmetric no- discrimination constraint is to encourage entry and serve consumers’ interests. This constraint prohibits the firm with significant market power to practice both behaviour-based price discrimination within the competitive segment and third-degree price discrimination across the monopolistic and competitive segments. We find that this constraint hinders entry and reduces welfare when the monopolistic segment is small.

The Relevance of International Spillovers and Asymmetric Effects in the Taylor Rule. CEPS Working Document No. 403, February 2015

Deviations of policy interest rates from the levels implied by the Taylor rule have been persistent before the financial crisis and increased especially after the turn of the century. Compared to the Taylor benchmark, policy rates were often too low. This paper provides evidence that both international spillovers, for instance international dependencies in the interest rate-setting of central banks, and nonlinear reaction patterns can offer a more realistic specification of the Taylor rule in the main industrial countries. The inclusion of international spillovers and, even more, nonlinear dynamics improves the explanatory power of standard Taylor reaction functions. Deviations from Taylor rates tend to be smaller and their negative trend can be eliminated.