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The Institute of International Monetary Research (IIMR, affiliated with the University of Buckingham) is holding an international conference on the assessment of Quantitative Easing (QE) in the US, UK, Eurozone and Japan on the 3rd of November (London). In the last few years a return to a more conventional set of monetary policies has been widely heralded, and in particular the return to a monetary policy rule focused on monetary stability and the stability of the overall economy over the long term (see the excellent conference organised by CATO and the Mercatus Centre  (George Mason University, US) on this very question just few weeks ago); but we believe the first priority at the moment is to analyse and clarify the impact of QE on financial markets and the broader economy. Amongst others, the following questions will be discussed: Has QE been instrumental in preventing another Great Depression? If QE is meant to boost asset prices, why has inflation generally been so low in recent years? Has QE increased inequality? Has QE been able to expand effectively broad money growth? Should QE programmes be extended at all? These are all vital questions we will address at the conference.

The conference is by invitation only and there are still (very few) places available, so please send an email to Gail Grimston at gail.grimston@buckingham.ac.uk should you wish to attend. It will be held on Thursday 3rd November 2016, in collaboration with Institute of Economic Affairs (IEA), at the IEA headquarters in London. You will be able to find a programme with all the topics and the speakers here  As you will see we are delighted to have an excellent panel of experts on this field from the US, continental Europe and the UK. There will be of course very well-known academics but also practitioners as well as central bank economists. In particular economists such as George Selgin (CATO), Kevin Dowd (Durham University), Christopher Neely (Federal Reserve Bank of St. Louis), Ryland Thomas (Bank of England) or Tim Congdon (IIMR, University of Buckingham) amongst many other very distinguished  economists will be giving a talk at the conference, which provides a unique opportunity to analyse in detail the effects and the effectiveness of QE in the most developed economies.

For your information you can also follow the conference live/streaming; please visit the IIMR website this week for further details on how to follow it remotely on the day. In addition the presentations (but not the discussion) will be filmed and published on our website later on. Drop us an email (enquiries@mv-pt.org) should you want to be updated on the Institute’s agenda and latest news.

Thank you,

Juan Castaneda

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A market solution for the Euro crisis

This month the Institute of Economic Affairs (London) has published a new book with a collection of essays of different authors on the crisis of the euro, edited by Philip Booth: “The Euro- the beginning, the middle … and the end?“. In these troubled times, dominated by those who only see more fiscal centralisation as the single way to overcome the euro crisis, this book is a true rarity; as, amongst others, it has several chapters with practical proposals to foster the introduction of more monetary competition to address and finally tackle some of the major problems affecting the European Monetary Union. And yes, I said “practical” proposals because, some of the chapters of the book do contain not only a description of the benefits of having more monetary competition in order to achieve more monetary stability in the medium to the long run, but also the institutional and market arrangements needed to be implemented in the current scenario in Europe.  A novelty indeed! In this regard, the proposal I support in the book (chapter 6), which consist of (1) at least the elimination of the legal tender clause and (2) the competition of the euro with the former national currencies, could be just a starting point in the right direction. Even more, we (profs. Schwartz, Cabrillo and myself) have calculated the costs of this alternative (more open) monetary regime and they are by far less than the costs we are all still paying just to maintain the current (flawed) system.

The publication of the book (12th April) was accompanied by the following (joint) statement of the contributing authors (see their names and  affiliations here):

“The euro zone as we know it must end or be radically reformed. Current mechanisms being used to manage the euro crisis are inadequate at every level. And as Cyprus shows us, the euro-zone crisis is far from over.
In new research from the Institute of Economic Affairs, The Euro: The Beginning, the Middle … and the End?, leading economists in this field, analyse the problems with the current approach being taken to resolve the euro zone crisis and argue:
  • Product and labour markets in euro-zone member states are far too rigid to respond adequately to economic shocks. The result has been high unemployment and prolonged recession in a number of euro-zone countries.
  • The EU must therefore face up to the inadequacies of its policies both in terms of the long-term structural errors in policy and of the short-term management of the euro-zone crisis.
  • There should not be a debt union of any form. Governments must be responsible for servicing their debts without bailouts.
  • Euro-zone countries must deregulate their labour markets and reduce government spending. Decentralisation and the promotion of a market economy must be at the heart of EU policy.
The report outlines several options for radical reform of monetary arrangements within the euro zone, including:
  • A complete and orderly break-up of the euro and a return to national currencies combined with the vigorous pursuit of free trade policies.
  • The suspension of Greece, and possibly other failing euro members, from all the decision-making mechanisms of the euro. These countries could then re-establish their own national currency to run in parallel with the euro. Both would be legal tender currencies with free exchange rates. Such an approach should be part of a more general agenda for decentralisation in the EU. This proposal mirrors the “hard ecu” proposal of the UK government before the euro was adopted as a single currency.
  • The enforcement of strict rules relating to government borrowing and debt that all member countries would have to meet. Member countries who did not obey the rules would not be able to take part in the decision-making mechanisms of the ECB. Furthermore, the ECB should play no part in underpinning the government debt of member countries.
  • A system of liberalised free-banking within which businesses and individuals choose the currency they wish to use.”

You can find more details on the book (and the full book free online) here, at the IEA website. The book will be presented at the IEA on the 9th of May (18:30); see more details here if you wish to attend.

I hope you find it interesting to promote the discussion on these important issues. All comments on our proposal on parallel currencies for the Euro zone will be very welcome.

Juan Castañeda

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