Does Money Matter in the Euro area? Evidence from a new Divisia Index. Bruegel Working Paper 2014/12, 6 November 2014

The purpose of this paper is to examine the possible role of money shocks on output and prices in the euro area. Since no Divisia monetary aggregates are available for the euro area, we first create and make available a database on euro-area Divisia monetary aggregates. We plan to update the dataset in the future and keep it publicly available. Using different SVAR models, we find sensible and statistically significant responses to Divisia money shocks, while the responses to simple-sum measures of money and interest rates are not statistically significant, and sometimes even the point estimates are not sensible.

The sovereign debt crisis that isn't: Or, How to turn a lending crisis into a spending crisis and pocket the spread. ACES Cases No. 2014.1

It’s a testament to the power of ideas in politics that the ongoing policy disaster in Europe is still referred to, by academic as well as popular commentators, as the European Sovereign Debt Crisis. That there was a crisis in European sovereign debt markets in 2010 through the middle of 2012 is not in doubt. That is was a crisis of European sovereign debt markets generated by ‘too much spending’ should be very much in doubt. The ongoing European economic crisis is in fact a transmuted private sector banking crisis first exacerbated and then calmed by central bank policy, the costs of which have been asymmetrically distributed across European mass publics.

One money with several cycles? Evaluation of European business cycles using cluster analysis. ACES Cases No. 2009.3

Optimal currency area theory suggests that business cycle comovement is a sufficient condition for monetary union, particularly if there are low levels of labour mobility between potential members of the monetary union. Previous studies of co-movement of business cycle variables (mainly authored by Artis and Zhang in the late 1990s) found that there was a core of member states in the EU that could be grouped together as having similar business cycle comovements, but these studies always used Germany as the country against which to compare. In this study, the analysis of Artis and Zhang is extended and updated but correlating against both German and euro area macroeconomic aggregates and using more recent techniques in cluster analysis, namely model-based clustering techniques.

Money, Finance and the Real Economy: What went wrong? CEPS Paperback, 17 March 2015

The functions of the financial system of a developed economy are often badly understood. This can largely be attributed to free-market ideology, which has spread the belief that leaving finance to its own devices would provide the best possible mechanism for allocating savings. The latest financial crisis has sparked the beginnings of a new awareness on this point, but it is far from having led to an improved understanding of the role of the financial institutions. For many people, finance remains more an enemy to be resisted than an instrument to be intelligently exploited. Its institutions, which issue and circulate money, play an important role in the working of the real economy that it would be imprudent to neglect. The allocation of savings, but also the level of activity and the growth rate depend on it. In this book, the authors carefully analyse the close links between money, finance and the real economy. In the process, they show why today the existence of a substantial potential of saving, instead of being an opportunity for the world economy, could threaten it with ‘secular stagnation’.