Every week, we discuss topical economic themes from a European perspective and provide perspective on key macro data news.
Optimal Government Debt Dynamics: Lessons from the Literature
We present the main academic insights about how government debt should evolve over time, if the government seeks to maximize social welfare. We discuss (i) how to deal with positive/negative expenditure surprises, (ii) how refinancing risk, due to interest rate risk, impacts optimal government debt dynamics, and (iii) the optimal long-run level of government debt.
The academic papers we mention are:
Barro, R. J., On the Determination of Public Debt, Journal of Political Economy, 1979, https://www.journals.uchicago.edu/doi/abs/10.1086/260807
Aiyagari, S.R., A. Marcet, T.J. Sargent, J. Seppälä, Optimal Taxation without State-Contingent Debt, Journal of Political Economy, 2002, https://doi.org/10.1086/343744
Adam, K., Government Debt and Optimal Monetary and Fiscal Policy, European Economic Review, 2011, https://doi.org/10.1016/j.euroecorev.2010.11.003
Adam, K. and M. Grill, Optimal Sovereign Default, American Economic Journal: Macroeconomics, 2017, https://www.jstor.org/stable/pdf/26156466.pdf
Critical Minerals for Europe: A Conversation With Bernard Dahdah
We talk with Bernard Dadah (Head of Commodity Research, Natixis) about critical minerals. What are these? How big of market do they have? Who mines and refines them? What can the EU's Critical Raw Materials Act (CRMA) achieve?
Macroeconomic Forecasting at the ECB, with Oscar Arce (Director General Economics)
We discuss with the ECB's Director General for Economics Oscar Arce about the Euro Area's macroeconomic outlook, the ECB's past forecast errors, the way forecasts are produced at the ECB and the difficulties associated with producing macroeconomic projections.
A true tour de force through the topic!
Review of the ECB Meeting: January 2025
We review the ECB's assessement of the economic situation & the outlook for policy rates going forward.
Is Germany the Sick Man of Europe?
We take stock of Germany's recent underperformance relative to its European peers and analyze its sources. We identify (real) household income dynamics as one of the main drivers.
Review of the ECB Meeting: December 2023
We review and critically discuss the decisions taken by the ECB after the suprisingly benign November inflation numbers.