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Vitor Constâncio
@VMRConstancio
, 3 tweets, 2 min read Read on Twitter
I strongly recommend the reading of this paper on demographics and future growth in Europe just presented in Sintra at the ECB Forum ecb.europa.eu/pub/conference… Just look to a few charts 1/n
Using a GE-OLG model the authors conclude: “Our central result is that economic growth is of course threatened by a declining total labor force and especially a declining ratio of workers to population, the support ratio.”
Another result is a collapse of return on capital. Big thinking about the future needed ( also on mon. pol.)Offset by more capital and productivity is not enough. The discussion focused on the need to explore more the effects of migration and increase of retirement age,etc.but ..
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Vitor Constâncio
@VMRConstancio
Joining the answers that I gave recently to Deutzsche Börse Zeitung and Le monde, I think the problem is one of instruments more than objectives because the pure bet that the expectations channel will push up inflation will not work. The same applies to price level targeting.
I have no theoretical objection to 1pp but there is a credibility problem if 2% has been difficult to achieve in several jurisdictions. A range centered on 2 is not helpful now. It would be seen as just a possible excuse to accept 1. So, difficult question and so I did not vote
I would need more space to fully address the issue. Not on Twitter then.
Read 4 tweets
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Vitor Constâncio
@VMRConstancio
Very insightful post on the evolution of the financial system structure in the US (and later arround the world) , basically since the 70s when portfolio theory approach led to see banks equal to any other financial institution, downplaying their special role in creating money 1/n
Tobin(63) paper was instrumental in this although it was basically saying (correctly) that banks do not have a “widow’s cruse” to create money without limit. Regretably, that was interpreted (incorrectly) as implying that banks were not much different from other institutions 2/n
Banks are the only institutions that create money(deposits) when they grant credit, in the sense of creating liabilities with fixed nominal value generally accepted as means of payment for all transactions. That is THE reason why banks are more heavily regulated. 3/n
Read 6 tweets
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Vitor Constâncio
@VMRConstancio
Could any British friend correct me in thinking that the UK PM still hopes to submit the present draft Agreement to a third vote?
1) If Parliament would vote today (very unlikely) for exit with no deal, she said that would become immediately Government policy.
2) If.... 1/n
2) If as expected, Parliament will refuse Brexit with no deal, that will not per se change either policy or the existent law stating March 29th as the exit date.
3) Parliament will then vote on Thursday whether it favours asking for a date extension... 3/n
4) If Parliament would vote (however illogically) against asking for an extension, that would justify submiting again to a vote the only existing deal.
5) If Parliament votes for the extension, then she said that it would have to choose among 3 alternatives: a)... 4/n
Read 8 tweets

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Noah Smith 🐇
@Noahpinion
In today's @bopinion post I lay out a very scary idea: a case for why low interest rates might be holding down productivity growth.

bloomberg.com/opinion/articl…
OK so we think that productivity growth in rich countries has slowed a lot since the recession.

That might seem minor, but over time it's really bad. Eventually it means back to a low-growth, zero-sum world. And that's probably not a good world.
What else has happened in rich countries since the Great Recession?

Interest rates have been very close to the zero lower bound.

Could these two be connected?
Read 15 tweets
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Christian Odendahl
@COdendahl
This is a great, thought-provoking speech by #Draghi, on European sovereignty. Though I disagree with some parts, the final part on “rules vs. institutions” is excellent. A thread. ecb.europa.eu/press/key/date…
Draghi starts out with the alleged conflict between EU membership and #sovereignty, which is crucial to understand the populism of #Brexit, Le Pen et al. He says: no conflict at all, to the contrary.
“True #sovereignty is reflected not in the power of making laws – as a legal definition would have it – but in the ability to control #outcomes … The ability to make independent decisions does not guarantee countries such control,” says Draghi.
Read 17 tweets
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Frederik Ducrozet
@fwred
Bad news again for the ECB today, and I'm not talking about the IFO but the Survey of Professional Forecasters. Inflation expectations down for the first time in close to two years. (1/n)
The distribution of inflation expectations is shifting in the wrong direction, with probabilities of 'low-flation' or even deflation on the rise again. (2/n)
Now the dis-anchoring of inflation expectations doesn't happen overnight. QE has helped 're-anchor' expectations over the past three years (chart based on this paper ecb.europa.eu/pub/pdf/scpwps…).
The ECB will do whatever is necessary to safeguard this. (3/n)
Read 4 tweets
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Musso
@Musso___
Parla Savona
E che dice Savona ?
1️⃣<La politica si nutre di realismo e l’accordo ... porta chiara questa impronta ... In assenza di ... lender of last resort ... ha fatto premio sulle esigenze del Paese, che erano e restano quelle di garantire una crescita>
👉 Resa.
scenarieconomici.it/il-compito-del…
2️⃣<gli investimenti aggiuntivi non possono se non essere privati ... La cintura di sicurezza che l’Italia sarà in condizione di attuare con le sue forze non👈 basterà per portare il Paese fuori dalla crisi iniziata nel 2008>
👉 Recessione.
Read 44 tweets
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Mike Bird
@Birdyword
"It would seem like a good idea for China to shoulder some of the burden of being the global reserve currency, just as the U.S. took over this duty from the U.K. a century ago"

🤔🤭
bloomberg.com/opinion/articl…
This is not what happened when the dollar took over from sterling as the lead reserve currency. It makes it sound like Montagu Norman rocked up in Washington and asked the Fed if they wanted to have a crack at it.
Before WWI if you wanted to import tea from Shanghai to the Dakotas you'd probably have to use a British bank and the sterling trade credit system. The US position as a reserve currency was weaker than the euro's is now.
Read 6 tweets
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European Central Bank
@ecb
Financial stability conditions in the euro area remain favourable but risk-taking in most financial markets has intensified over the last six months. Read our press release on the latest Financial Stability Review to find out more ecb.europa.eu/press/pr/date/…
Watch: Vice-President Vítor Constâncio introduces the latest edition of the Financial Stability Review. Read the full report ecb.europa.eu/pub/fsr/html/i…
Watch: Constâncio talks about risks in the banking sector ecb.europa.eu/pub/fsr/html/i…
Read 5 tweets

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