The Week That Was in Europe Klaus Adam & Dirk Schumacher

We discuss with Alicia Garcia Herrero, Head of the Asian economic research platform of Natixis:

(i) why the EU-China relationship has deteriorated,

(ii) the Chinese perspective on this relationship, and

(ii) how the relationship might develop going forward.

We discuss under what circumstances and how the aggregate price level responds to fiscal decisions. We highlight the conditions under which the so-called Fiscal Theory of the Price Level applies and to what extent the data supports this theory.

We discuss with Ulrich Bindseil, Director General at the European Central Bank, about central bank balance sheets and the role of upcoming central bank losses, associated with past expansion of central bank balance sheets and rising short-term interest rates.

We review and evaluate the main monetary policy decisions taken in the ECB meeting on Oct 27, 2022.

We discuss with Prof. Stefan Reichelstein about cost effective ways to achieve the Green Transition in Europe and the U.S.. Prof. Reichelstein is Director of the Mannheim Institute for Sustainable Energy Studies (MISES) and was formerly professor at Stanford & Berkeley.

More information about MISES is available here:

https://www.uni-mannheim.de/en/mises/

European governments have become accustomed to running persistent primary deficits. This is only sustainable for debt dynamics if interest rates R are below the economy's growth rate G. We check if R G was satisfied over the past 20 years and the discuss the outlook for this relationship in the future.



Papers we mention in the podcast are:

Atif Mian, Ludwig Straub, and Amir Sufi. Forthcoming. “What explains the decline in r*? Rising income inequality versus demographic shifts.” Proceedings of the 2021 Jackson Hole Symposium.



Paul Schmelzing, "Eight centuries of global real interest rates, R-G, and the ‘suprasecular’ decline, 1311–2018", https://www.bankofengland.co.uk/working-paper/2020/eight-centuries-of-global-real-interest-rates-r-g-and-the-suprasecular-decline-1311-2018