Myanmar Sugar SMEs: History, Technology, Location and Government Policy

Small and medium enterprises (SMEs) engaged in sugar processing in Myanmar appeared in the last decade of the socialist era. An acute sugar deficit, restricted trade in white sugar, and high demand from the conventional dairy business led to the growth of sugar SMEs by appropriate blending of semi-finished products (syrup) in the fields, which were then processed in vacuum pans and centrifugals to obtain white sugar. This became a tradable commodity and sugar SMEs grew in clusters in big cities. They are family-owned businesses. However, they lack the bagasse-based power generation. In recent years, large modern sugar factories operated by private and military companies have emerged as key players. The current shortage of fuel feedstock and competition for raw materials have become driving forces that shift sugar SMEs from market-oriented to raw material-oriented locations. Internal competition among key players made sugar price highly volatile, too. Being placed on a level playing field, the whole industry should be upgraded in terms of price and quality to become export-oriented.

Effectiveness of the monetary policy framework in present-day India : have financial variables functioned as useful policy indicators

In April 1998, the RBI, the Indian central bank, formally announced a shift in its policy framework from monetary targeting to a multiple indicator approach, and since then, under this framework, the bank has considered a range of economic and financial variables as policy indicators for drawing policy perspectives. This paper aims to examine the effectiveness of this current policy framework in India by analyzing the causal relationships of each indicator variable on the objective variables. The results reveal that, except for bank credit, all indicator variables considered in this study have a causal relationship with at least either output or price level, suggesting that most preannounced economic and financial variables have served as useful policy indicators under the multiple indicator approach.

Firm dynamics in the Cambodian garment industry: firm turnover, productivity growth, and wage profile under trade liberalization

The international garment trade was liberalized in 2005 following the termination of the MFA (Multifibre Arrangement) and ever since then, price competition has intensified. Employing a unique firm dataset collected by the authors, this paper examines the changes in the performance of Cambodian garment firms between 2002/03 and 2008/09. During the period concerned, frequent firm turnover led to an improvement of the industry’s productivity, and the study found that the average total-factor productivity (TFP) of new entrants was substantially higher than that of exiting firms. Furthermore, we observed that thanks to productivity growth, an improvement in workers’ welfare, including a rise in the relative wages of the low-skilled, was taking place. These industrial dynamics differ considerably from those indicated by the “race to the bottom” argument as applied to labor-intensive industrialization in low income countries.

The rise and fall in the price of food, fuel and manufactured goods : interdependency between prices and technology determining comparative advantages and development paths

Green innovation, which enables us to extract energy from food crops, caused a food shortage in 2008. Countries suffering severe damage started to reconsider their agricultural policy with the aim of becoming more autonomous. The food price hike of the time looks like a reversal of the celebrated Singer-Prebisch thesis proposed in the 1950s. This paper examines the consequences of this trend on the comparative advantages and development strategies of developing countries. For that purpose, first, trends and short-run fluctuations in the prices of fuel and bio-energy crops are investigated. It is shown that the price series of fuels and the crops are synchronized only after the fuel extracting technology came into effect. Second, the reversal of the Singer-Prebisch thesis is underpinned by the generic form of an endogenous growth model developed by Rebelo (1991). It is shown that as an economy grows, appreciation of the non-reproducible, such as mineral resources and raw labor, over the reproducible, such as capital goods, is the norm rather than an anomaly. Third, the consequences of the food price hike and underlying capital accumulation on the development strategies of labor-abundant and low-income countries are explored. It is concluded that the impact of the food price hikes on the alteration of a development strategy is only incremental, without reinforcement from raw-labor-saving innovation. A case study of inventions by JUKI Corporation, a world-leader in the sewing machine market exemplifies the fact that, of all the major inventions the company have made, raw-labor-saving inventions have not dominated, although JUKI's machines are sold to one of the most raw-labor-intensive industries.

Assessing the impact of adaptive accessibility on the optimal transport policy implementation by using an integrated land-use/transport model for Madrid

Accessibility is an essential concept widely used to evaluate the impact of land-use and transport strategies in transport and urban planning. Accessibility is typically evaluated by using a transport model or a land-use model independently or successively without a feedback loop, thus neglecting the interaction effects between the two systems and the induced competition effects among opportunities due to accessibility improvements. More than a mere methodological curiosity, failure to account for land- use/transport interactions and the competition effect may result in large underestimation of the policy effects. With the recent development of land-use and transport interaction (LUTI) models, there is a growing interest in using these models to adequately measure accessibility and evaluate its impact. The current study joins this research stream by embedding an accessibility measure in a LUTI model with two main aims. The first aim is to account for adaptive accessibility, namely the adjustment of the potential accessibility due to the effect of competition among opportunities (e.g., workplaces) as a result of improved accessibility. LUTI models are particularly suitable for assessing adaptive accessibility because the competition factor is a function of the number of jobs, which is related to land-use attractiveness and the number of workers which is related, among other factors, to the transport demand. The second aim is to identify the optimal implementation scenario of policy measures on the basis of the potential and adaptive accessibility and analyse the results in terms of social welfare and accessibility. The metropolitan area of Madrid is used as a case-study and two transport policy instruments, namely a cordon toll and bus frequency increase, have been chosen for the simulation study in order to present the usefulness of the approach to urban planners and policy makers. The MARS model (Metropolitan Activity Relocation Simulator) calibrated for Madrid was employed as the analysis tool. The impact of accessibility is embedded in the model through a social welfare function that includes not only costs and benefits to both road users and transport operators, but also costs and benefits for the government and society in general (external costs). An optimisation procedure is performed by the MARS model for maximizing the value of objective function in order to find the best (optimal) policy imp lementations intensity (i.e., price, frequency). Last, the two policy strategies are evaluated in terms of their accessibility. Results show that the accessibility with competition factor influences the optimal policy implementation level and also generates different results in terms of social welfare. In addition, mapping the difference between the potential and the adaptive accessibility indicators shows that the main changes occur in areas where there is a strong competition among land-use opportunities.

A multi-scale analysis of transforming agricultural markets in the context of globalization: implications for natural resources, food prices and rural poverty in Latin America

Vivimos una época en la que el mundo se transforma aceleradamente. La globalización está siguiendo un curso imparable, la población mundial así como la población urbana siguen creciendo, y en los países emergentes los ingresos promedios aumentan, resultando en un cambio también acelerado de las dietas y hábitos alimentarios. En conjunto esos factores están causando un aumento fundamental de la demanda de alimentos. Junto con la apertura de los mercados agrícolas, estos procesos han provocado un crecimiento del comercio internacional de alimentos durante la última década. Dado que muchos países de América Latina están dotados de abundancia de recursos naturales, estas tendencias han producido un crecimiento rápido de las exportaciones de bienes primarios desde América Latina al resto del mundo. En sólo 30 años la participación en el mercado agrícola de América Latina casi se ha duplicado, desde 10% en 1980 a 18% en 2010. Este aumento del comercio agrícola ha dado lugar a un debate sobre una serie de cuestiones cruciales relacionadas con los impactos del comercio en la seguridad alimentaria mundial, en el medio ambiente o en la reducción de la pobreza rural en países en desarrollo. Esta tesis aplica un marco integrado para analizar varios impactos relacionados con la transformación de los mercados agrícolas y los mercados rurales debidos a la globalización y, en particular, al progresivo aumento del comercio internacional. En concreto, la tesis aborda los siguientes temas: En primer lugar, la producción mundial de alimentos tendrá que aumentar considerablemente para poder satisfacer la demanda de una población mundial de 9000 millones personas en 2050, lo cual plantea grandes desafíos sobre los sistemas de la producción de alimentos. Alcanzar este logro, sin comprometer la integridad del medio ambiente en regiones exportadoras, es un reto aún mayor. En este contexto, la tesis analiza los efectos de la liberalización del comercio mundial, considerando distintas tecnologías de producción agraria, sobre unos indicadores de seguridad alimentaria en diferentes regiones del mundo y sobre distintos indicadores ambientales, teniendo en cuenta escalas diferentes en América Latina y el Caribe. La tesis utiliza el modelo “International Model for Policy Analysis of Agricultural Commodities and Trade (IMPACT)” – un modelo dinámico de equilibrio parcial del sector agrícola a escala global – para modelar la apertura de los mercados agrícolas así como diferentes escenarios de la producción hasta el año 2050. Los resultados del modelo están vinculados a modelos biofísicos para poder evaluar los cambios en la huella hídrica y la calidad del agua, así como para cuantificar los impactos del cambio en el uso del suelo sobre la biodiversidad y los stocks de carbono en 2050. Los resultados indican que la apertura de los mercados agrícolas es muy importante para mejorar la seguridad alimentaria a nivel mundial, sin embargo, produce también presiones ambientales indeseables en algunas regiones de América Latina. Contrastando dos escenarios que consideran distintas modos de producción, la expansión de la tierra agrícola frente a un escenario de la producción más intensiva, se demuestra que las mejoras de productividad son generalmente superiores a la expansión de las tierras agrícolas, desde un punto de vista económico e ambiental. En cambio, los escenarios de intensificación sostenible no sólo hacen posible una mayor producción de alimentos, sino que también generan menos impactos medioambientales que los otros escenarios futuros en todas sus dimensiones: biodiversidad, carbono, emisiones de nitratos y uso del agua. El análisis muestra que hay un “trade-off” entre el objetivo de alcanzar la sostenibilidad ambiental y el objetivo de la seguridad alimentaria, independiente del manejo agrícola en el futuro. En segundo lugar, a la luz de la reciente crisis de los precios de alimentos en los años 2007/08, la tesis analiza los impactos de la apertura de los mercados agrícolas en la transmisión de precios de los alimentos en seis países de América Latina: Argentina, Brasil, Chile, Colombia, México y el Perú. Para identificar las posibles relaciones de cointegración entre los índices de precios al consumidor de alimentos y los índices de precios de agrarios internacionales, sujetos a diferentes grados de apertura de mercados agrícolas en los seis países de América Latina, se utiliza un modelo simple de corrección de error (single equation error correction). Los resultados indican que la integración global de los mercados agrícolas ha dado lugar a diferentes tasas de transmisión de precios en los países investigados. Sobre todo en el corto plazo, las tasas de transmisión dependen del grado de apertura comercial, mientras que en el largo plazo las tasas de transmisión son elevadas, pero en gran medida independientes del régimen de comercio. Por lo tanto, durante un período de shocks de precios mundiales una mayor apertura del comercio trae consigo más inestabilidad de los precios domésticos a corto plazo y la resultante persistencia en el largo plazo. Sin embargo, estos resultados no verifican necesariamente la utilidad de las políticas comerciales, aplicadas frecuentemente por los gobiernos para amortiguar los shocks de precios. Primero, porque existe un riesgo considerable de volatilidad de los precios debido a cambios bruscos de la oferta nacional si se promueve la autosuficiencia en el país; y segundo, la política de proteccionismo asume el riesgo de excluir el país de participar en las cadenas de suministro de alto valor del sector agrícola, y por lo tanto esa política podría obstaculizar el desarrollo económico. Sin embargo, es indispensable establecer políticas efectivas para reducir la vulnerabilidad de los hogares a los aumentos repentinos de precios de alimentos, lo cual requiere una planificación gubernamental precisa con el presupuesto requerido disponible. En tercer lugar, la globalización afecta a la estructura de una economía y, por medios distintos, la distribución de los ingreso en un país. Perú sirve como ejemplo para investigar más profundamente las cuestiones relacionadas con los cambios en la distribución de los ingresos en zonas rurales. Perú, que es un país que está cada vez más integrado en los mercados mundiales, consiguió importantes descensos en la pobreza extrema en sus zonas rurales, pero a la vez adolece de alta incidencia de pobreza moderada y de desigualdad de los ingresos en zonas rural al menos durante el periodo comprendido entre 2004 y 2012. Esta parte de la tesis tiene como objetivo identificar las fuerzas impulsoras detrás de estas dinámicas en el Perú mediante el uso de un modelo de microsimulación basado en modelos de generación de ingresos aplicado a nivel los hogares rurales. Los resultados indican que la fuerza principal detrás de la reducción de la pobreza ha sido el crecimiento económico general de la economía, debido a las condiciones macroeconómicas favorables durante el periodo de estudio. Estos efectos de crecimiento beneficiaron a casi todos los sectores rurales, y dieron lugar a la disminución de la pobreza rural extrema, especialmente entre los agricultores de papas y de maíz. En parte, estos agricultores probablemente se beneficiaron de la apertura de los mercados agrícolas, que es lo que podría haber provocado un aumento de los precios al productor en tiempos de altos precios mundiales de los alimentos. Sin embargo, los resultados también sugieren que para una gran parte de la población más pobre existían barreras de entrada a la hora de poder participar en el empleo asalariado fuera de la agricultura o en la producción de cultivos de alto valor. Esto podría explicarse por la falta de acceso a unos activos importantes: por ejemplo, el nivel de educación de los pobres era apenas mejor en 2012 que en 2004; y también las dotaciones de tierra y de mano de obra, sobre todo de los productores pobres de maíz y patata, disminuyeron entre 2004 y 2012. Esto lleva a la conclusión de que aún hay margen para aplicar políticas para facilitar el acceso a estos activos, que podría contribuir a la erradicación de la pobreza rural. La tesis concluye que el comercio agrícola puede ser un importante medio para abastecer una población mundial creciente y más rica con una cantidad suficiente de calorías. Para evitar adversos efectos ambientales e impactos negativos para los consumidores y de los productores pobres, el enfoque debe centrarse en las mejoras de la productividad agrícola, teniendo en cuenta los límites ambientales y ser socialmente inclusivo. En este sentido, será indispensable seguir desarrollando soluciones tecnológicas que garanticen prácticas de producción agrícola minimizando el uso de recursos naturales. Además, para los pequeños pobres agricultores será fundamental eliminar las barreras de entrada a los mercados de exportación que podría tener efectos indirectos favorables a través de la adopción de nuevas tecnologías alcanzables a través de mercados internacionales. ABSTRACT The world is in a state of rapid transition. Ongoing globalization, population growth, rising living standards and increasing urbanization, accompanied by changing dietary patterns throughout the world, are increasing the demand for food. Together with more open trade regimes, this has triggered growing international agricultural trade during the last decade. For many Latin American countries, which are gifted with relative natural resource abundance, these trends have fueled rapid export growth of primary goods. In just 30 years, the Latin American agricultural market share has almost doubled from 10% in 1980 to 18% in 2010. These market developments have given rise to a debate around a number of crucial issues related to the role of agricultural trade for global food security, for the environment or for poverty reduction in developing countries. This thesis uses an integrated framework to analyze a broad array of possible impacts related to transforming agricultural and rural markets in light of globalization, and in particular of increasing trade activity. Specifically, the following issues are approached: First, global food production will have to rise substantially by the year 2050 to meet effective demand of a nine billion people world population which poses major challenges to food production systems. Doing so without compromising environmental integrity in exporting regions is an even greater challenge. In this context, the thesis explores the effects of future global trade liberalization on food security indicators in different world regions and on a variety of environmental indicators at different scales in Latin America and the Caribbean, in due consideration of different future agricultural production practices. The International Model for Policy Analysis of Agricultural Commodities and Trade (IMPACT) –a global dynamic partial equilibrium model of the agricultural sector developed by the International Food Policy Research Institute (IFPRI)– is applied to run different future production scenarios, and agricultural trade regimes out to 2050. Model results are linked to biophysical models, used to assess changes in water footprints and water quality, as well as impacts on biodiversity and carbon stocks from land use change by 2050. Results indicate that further trade liberalization is crucial for improving food security globally, but that it would also lead to more environmental pressures in some regions across Latin America. Contrasting land expansion versus more intensified agriculture shows that productivity improvements are generally superior to agricultural land expansion, from an economic and environmental point of view. Most promising for achieving food security and environmental goals, in equal measure, is the sustainable intensification scenario. However, the analysis shows that there are trade-offs between environmental and food security goals for all agricultural development paths. Second, in light of the recent food price crisis of 2007/08, the thesis looks at the impacts of increasing agricultural market integration on food price transmission from global to domestic markets in six Latin American countries, namely Argentina, Brazil, Chile, Colombia, Mexico and Peru. To identify possible cointegrating relationships between the domestic food consumer price indices and world food price levels, subject to different degrees of agricultural market integration in the six Latin American countries, a single equation error correction model is used. Results suggest that global agricultural market integration has led to different levels of price path-through in the studied countries. Especially in the short-run, transmission rates depend on the degree of trade openness, while in the long-run transmission rates are high, but largely independent of the country-specific trade regime. Hence, under world price shocks more trade openness brings with it more price instability in the short-term and the resulting persistence in the long-term. However, these findings do not necessarily verify the usefulness of trade policies, often applied by governments to buffer such price shocks. First, because there is a considerable risk of price volatility due to domestic supply shocks if self-sufficiency is promoted. Second, protectionism bears the risk of excluding a country from participating in beneficial high-value agricultural supply chains, thereby hampering economic development. Nevertheless, to reduce households’ vulnerability to sudden and large increases of food prices, effective policies to buffer food price shocks should be put in place, but must be carefully planned with the required budget readily available. Third, globalization affects the structure of an economy and, by different means, the distribution of income in a country. Peru serves as an example to dive deeper into questions related to changes in the income distribution in rural areas. Peru, a country being increasingly integrated into global food markets, experienced large drops in extreme rural poverty, but persistently high rates of moderate rural poverty and rural income inequality between 2004 and 2012. The thesis aims at disentangling the driving forces behind these dynamics by using a microsimulation model based on rural household income generation models. Results provide evidence that the main force behind poverty reduction was overall economic growth of the economy due to generally favorable macroeconomic market conditions. These growth effects benefited almost all rural sectors, and led to declines in extreme rural poverty, especially among potato and maize farmers. In part, these farmers probably benefited from policy changes towards more open trade regimes and the resulting higher producer prices in times of elevated global food price levels. However, the results also suggest that entry barriers existed for the poorer part of the population to participate in well-paid wage-employment outside of agriculture or in high-value crop production. This could be explained by a lack of sufficient access to important rural assets. For example, poor people’s educational attainment was hardly better in 2012 than in 2004. Also land and labor endowments, especially of (poor) maize and potato growers, rather decreased than increased over time. This leads to the conclusion that there is still scope for policy action to facilitate access to these assets, which could contribute to the eradication of rural poverty. The thesis concludes that agricultural trade can be one important means to provide a growing and richer world population with sufficient amounts of calories. To avoid adverse environmental effects and negative impacts for poor food consumers and producers, the focus should lie on agricultural productivity improvements, considering environmental limits and be socially inclusive. In this sense, it will be crucial to further develop technological solutions that guarantee resource-sparing agricultural production practices, and to remove entry barriers for small poor farmers to export markets which might allow for technological spill-over effects from high-value global agricultural supply chains.

Assessing the accessibility impact of transport policy by a land-use and transport interaction model - The case of Madrid

Accessibility is an essential concept widely used to evaluate the impact of transport and land-use strategies in urban planning and policy making. Accessibility is typically evaluated by using separately a transport model or a land-use model. This paper embeds two accessibility indicators (i.e., potential and adaptive accessibility) in a land use and transport interaction (LUTI) model in order to assess transport policies implementation. The first aim is to define the adaptive accessibility, considering the competition factor at territorial level (e.g. workplaces and workers). The second aim is to identify the optimal implementation scenario of policy measures using potential and adaptive accessibility indicators. The analysis of the results in terms of social welfare and accessibility changes closes the paper. Two transport policy measures are applied in Madrid region: a cordon toll and increase bus frequency. They have been simulated through the MARS model (Metropolitan Activity Relocation Simulator, i.e. LUTI model). An optimisation procedure is performed by MARS for maximizing the value of the objective function in order to find the optimal policy implementation (first best). Both policy measures are evaluated in terms of accessibility. Results show that the introduction of the accessibility indicators (potential and adaptive) influence the optimal value of the toll price and bus frequency level, generating different results in terms of social welfare. Mapping the difference between potential and adaptive accessibility indicator shows that the main changes occur in areas where there is a strong competition among different land-use opportunities.

ANALISANDO A RELAÇÃO DOS VOLUMES DE EXPORTAÇÃO E DE IMPORTAÇÃO, PIB, TAXAS DE CÂMBIO E INFLAÇÃO NO PERÍODO DE 2004 A 2014.

Esta dissertação visa deslumbrar uma análise macroeconômica do Brasil, especialmente no que se refere à relação dos índices mensais dos volumes das exportações e das importações com os volumes mensais do PIB, da Taxa SELIC e as Taxas de Câmbio, conforme dados coletados no período de janeiro de 2004 a dezembro de 2014, através de pesquisa literária referente aos históricos sobre cada conceito envolvido no âmbito da macroeconomia das varáveis estudadas. Foi realizado um estudo de caso embasado em dados de sites governamentais, no período delimitado, empregando-se o método de regressão linear, com base na Teoria da correlação de Pearson, demonstrando os resultados obtidos no período do estudo para as varáveis estudadas. Desta maneira, conseguiu-se estudar e analisar como as variáveis dependentes (resposta): volume das exportações e volume das importações estão relacionadas com as varáveis independentes (explicativas): PIB, Taxa Selic e taxa de Câmbio. Os resultados apurados no presente estudo permitem identificar que existe correlação moderada e negativa, quando analisadas a Taxa Selic e a Taxa de Câmbio com os volumes das exportações e das importações, enquanto o PIB apresenta correlação forte e positiva na análise com os volumes das exportações e das importações

The Global Carbon Pricing Policy Solution to Climate Change

While the topic of climate change is controversial, the world needs to take a precautionary approach to reduce carbon dioxide emissions. With growing populations and increasing energy demands, solutions to cleaner energy need to be developed and implemented. In order to successfully reduce carbon dioxide emissions, a global carbon pricing policy needs to be developed that includes all countries and allows each region to utilize the best clean energy technology options along with economic incentives that will be the most effective. The research conducted in this project validates the hypothesis that placing a monetary price on carbon will allow natural, technological, and financial resources to come together to implement a feasible energy solution that will reduce global carbon dioxide emissions.

Technical efficiency in the retail food industry: the influence of inventory investment, wage levels, and age of the firm

The objective of this paper is to estimate technical efficiency in retailing; and the influence of inventory investment, wage levels, and firm age on this efficiency. We use the output supermarket chains’ sales volume, calculated isolating the retailer price effect on its sales revenue. This output allows us to estimate a strictly technical concept of efficiency. The methodology is based on the estimation of a stochastic parametric function. The empirical analyses applied to panel data on a sample of 42 supermarket chains between 2000 and 2002 show that inventory investment and wage level have an impact on technical efficiency. In comparison, the effect of these factors on efficiency calculated through a monetary output (sales revenue) shows some differences that could be due to aspects related to product prices.

International Capital Flows and Monetary Policy Spillovers

This dissertation examines the drivers and implications of international capital flows. The overarching motivation is the observation that countries not at the centre of global financial markets are subject to considerable spillovers from centre countries, notably from their monetary policy. I present new empirical evidence on the determinants of the observed patterns of international capital flows and monetary policy spillovers, and study their effect on both financial markets and the real economy. In Chapter 2 I provide evidence on the determinants of a puzzling negative correlation observed between productivity growth and net capital inflows to developing and emerging market economies (EMEs) since 1980. By disaggregating net capital inflows into their gross components, I show that this negative correlation is explained by capital outflows related to purchases of very liquid assets from the fastest growing countries. My results suggest a desire for international portfolio diversification in liquid assets by fast growing countries is driving much of the original puzzle. In the reminder of my dissertation I pivot to study the foreign characteristics that drive international capital flows and monetary policy spillovers, with a particular focus on the role of unconventional monetary policy in the United States (U.S.). In Chapter 3 I show that a significant portion of the heterogeneity in EMEs' asset price adjustment following the quantitative easing operations by the Federal Reserve (the Fed) during 2008-2014 can be explained by the degree of bilateral capital market frictions between these countries and the U.S. This is true even after accounting for capital controls, exchange rate regimes, and domestic monetary policies. Chapter 4, co-authored with Michal Ksawery Popiel, studies unconventional monetary policy in a small open economy, looking specifically at the case of Canada since the global financial crisis. We quantify the effect Canadian unconventional monetary policy shocks had on the real economy, while carefully controlling for and quantifying spillovers from U.S. unconventional monetary policy. Our results indicate that the Bank of Canada's unconventional monetary policy increased Canadian output significantly from 2009-2010, but that spillovers from the Fed's policy were even more important for increasing Canadian output after 2008.

You'd better bet on the ETS. Bruegel Policy Brief 2013/02, April 2013

The issue: The European Union's emissions trading system (ETS), introduced in 2005, is the centerpiece of EU decarbonisation efforts and the biggest emissions trading scheme in the world. After a peak in May 2008, the price of ETS carbon allowances started to collapse, and industry, civil society and policymakers began to think about how to ‘repair the ETS’. However, the ETS is an effective and efficient tool to mitigate greenhouse gas emissions, and although prices have not been stable, it has evolved to cover more sectors and greenhouse gases, and to become more robust and less distorting. Prices are depressed because of an interplay of fundamental factors and a lack of confidence in the system. Policy challenge The ETS must be stabilised by reinforcing the credibility of the system so that the use of existing low-carbon alternatives (for example burning gas instead of coal) is incentivised and investment in low-carbon assets is ensured. Further-more, failure to reinvigorate the ETS might compromise the cost-effective synchronisation of European decarbonisation efforts across sectors and countries. To restore credibility and to ensure long-term commitment to the ETS, the European Investment Bank should auction guarantees on the future emission allowance price.This will reduce the risk for low-carbon investments and enable stabilisation of the ETS until a compromise is found on structural measures to reinforce it in order to achieve the EU's long-term decarbonisation targets.

Central bank cooperation during the great recession. Bruegel Policy Contribution. Bruegel Policy Contribution 2013/08, 20 June 2013

During the Great Recession, central banks went well beyond their normal operations and provided liquidity in unlimited amounts, in foreign currency and to foreign banks. Central bank cooperation took the form of a swap network, and amounted to an episode of global monetary policy. However, though bank cooperation will continue to contribute to global governance, the swap network should not be made permanent and given an institutional basis to provide international lending of last resort. Swaps are a monetary policy tool and should continue to be decided on by central banks like all other monetary policy tools,to avoid impinging on their independence, which a difficult historical process has shown to be the best basis for price stability.

The euro area's tightrope walk: debt and competitiveness in Italy and Spain. Bruegel Policy Contribution 2013/11, September 2013

Competitiveness adjustment in struggling southern euro-area members requires persistently lower inflation than in major trading partners, but low inflation worsens public debt sustainability. When average euro-area inflation undershoots the two percent target, the conflict between intra-euro relative price adjustment and debt sustainability is more severe. In our baseline scenario, the projected public debt ratio reduction in Italy and Spain is too slow and does not meet the European fiscal rule. Debt projections are very sensitive to underlying assumptions and even small negative deviations from GDP growth, inflation and budget surplus assumptions can easily result in a runaway debt trajectory. The case for a greater than five percent of GDP primary budget surplus is very weak. Beyond vitally important structural reforms, the top priority is to ensure that euro area inflation does not undershoot the two percent target, which requires national policy actions and more accommodative monetary policy. The latter would weaken the euro exchange rate, thereby facilitating further intra-euro adjustment. More effective policies are needed to foster growth. But if all else fails, the European Central Bank’s Outright Monetary Transactions could reduce borrowing costs.

The European Central Bank in the age of banking union. Bruegel Policy Contribution 2013/13, 1 October 2013

During the crisis the European Central Bank’s roles have been greatly extended beyond its price stability mandate. In addition to the primary objective of price stability and the secondary objective of supporting EU economic policies, we identify ten new tasks related to monetary policy and financial stability. We argue that there are three main constraints on monetary policy: fiscal dominance, financial repercussions and regional divergences. By assessing the ECB’s tasks in light of these constraints, we highlight a number of synergies between these tasks and the ECB’s primary mandate of price stability. But we highlight major conflicts of interest related to the ECB’s participation in financial assistance programmes. We also underline that the ECB’s government bond purchasing programmes have introduced the concept of ‘monetary policy under conditionality’, which involves major dilemmas. A solution would be a major change towards a US-style system, in which state public debts are small, there are no federal bail-outs for states, the central bank does not purchase state debt and banks do not hold state debt. Such a change is unrealistic in the foreseeable future.