SOFIA – The recent surge in inflation in both the US and Europe has been blamed primarily on supply shocks. But a closer look suggests that the very central banks that are now being praised for reining in the surge in prices played a significant role in causing it. Advanced-economy central bankers seem to have earned their summer vacation. With ...

BRUSSELS – If Europe is willing to pay the price of expensive LNG imports, it could severely undermine Russia's ability to earn hard currency via gas exports to finance the war in Ukraine. But this would carry high costs for Europe, too. In a matter of months, the European Union has reduced its dependence on Russian oil so much that it is ...

BRUSSELS – Societies that cannot accept today's energy prices are unlikely to prepare adequately for the green transition, regardless of their long-term net-zero promises. They are instead likely to act too late and thus too suddenly, which will be not only economically costly, but also politically untenable. This month represents an ...

BRUSSELS – Afghanistan experienced rapid economic growth in the decade following the US invasion and the ouster of the Taliban. But the subsequent stagnation of living standards – rooted in the failure to build a self-sustaining domestic economy – made unrest all but inevitable. Nation-building has manifestly failed in Afghanistan. MIT's ...

BRUSSELS – Different economic conditions and priorities in the US and the eurozone are leading to divergent macroeconomic-policy approaches. While there is nothing shocking about this, there are potential longer-term effects that should not be underestimated. With Europe finally beginning to catch up to the United States in vaccinating ...

BRUSSELS – Global supply chains have weathered the pandemic intact, and the deep recession has not unleashed a wave of protectionism. That is good for global trade, and probably for foreign direct investment, too, and suggests that predictions of globalization's demise were premature. Trade is recovering robustly alongside the upticks in growth ...

BRUSSELS – With governments in advanced economies continuing to keep the fiscal taps open, it is worth considering whether additional stimulus is really what the situation demands. Unlike the aftermath of the 2008 crisis, the problem today is not a lack of purchasing power, but rather circumstances unique to a viral pandemic. When COVID-19 ...

BRUSSELS – Given their strong performance during the COVID-19 crisis, and their US counterparts' ongoing debacle, European leaders who have been pushing for a stronger global role for the euro may be about to get their wish. But it may not be long before they regret it. Europe is experiencing a “good” crisis. Despite the damage wrought by ...

BRUSSELS – Neither interest-rate cuts nor new government spending would do much to offset the short-term effects of COVID-19 in Europe. Central banks and government authorities should explain this to the public, and then focus their attention on the less glamorous work of safeguarding public health, household incomes, and the financial system. ...

BRUSSELS – It is hard to understand why the European Central Bank is currently so anxious to find new ways to make its policy stance even more expansionary. Its hyper-vigilance about falling prices is misplaced, and its ability to increase the rate of inflation is dubious. Central banks aim for price stability, and today, prices are largely ...

BRUSSELS – Economic analysis suggests that bilateral trade wars are unwinnable in an interconnected world. By firing his latest tariff salvo against China, US President Donald Trump has further raised the stakes in an increasingly damaging dispute – and America is likely to emerge as the bigger loser. For a while at least, trade tensions ...

BRUSSELS – Whereas the battle over 4G mobile networks was essentially commercial, the ongoing 5G debate is about geopolitics, technological leadership, and national security. And Europe, in particular, must develop a much stronger common approach in order to make itself less vulnerable to security risks. How times change. Not so long ago, the ...

BRUSSELS – The fact that eurozone inflation is closer to 1% than 2% is not ideal, but the European Central Bank should not be overly concerned. The ECB does not need to pull out all the stops and invent ever more instruments in the forlorn hope of increasing inflation by a few tenths of a percentage point. A year ago, the European Central ...

BRUSSELS – Even if China's non-tariff barriers remain high, they are lower than in the past. In fact, current complaints about unfair Chinese trade practices are actually complaints about the mismatch between the slow pace of economic opening and the very fast pace of modernization. The temporary truce reached by US President Donald Trump and ...

BRUSSELS – Central banks throughout the developed world have been overwhelmed by the fear of deflation. They shouldn't be: The fear is unfounded, and the obsession with it is damaging.

Japan is a poster child for the fear. In 2013, decades of (gently) falling prices prompted the Bank of Japan to embark on an unprecedented monetary offensive. But while headline inflation increased for a while, the factors driving that increase – a competitive depreciation ...

BRUSSELS – Stubbornly low inflation has the European Central Bank worried. But its response – essentially just more quantitative easing – could backfire, exacerbating imbalances and generating serious financial instability. As it stands, the headline consumer price index in the eurozone hovers around zero, and even core inflation remains below ...

BRUSSELS – It has now been nearly half a year since the European Central Bank declared its intention to buy some €1.1 trillion ($1.3 trillion) worth of eurozone bonds. When it first announced the so-called "extended asset-purchase program" in January, the ECB emphasized that it was only expanding an existing program, under which it had been ...

European policymakers have decided that they must be seen to be “doing something” about youth unemployment. A special summit of Europe’s heads of state has been called, and a “Youth Employment Initiative,” proposed at the EU Council of Ministers’ meeting in February, aims to “reinforce and accelerate” measures that were recommended in a ...

The most visible symptom of the crisis in the eurozone has been the high and variable risk premiums that its peripheral countries now must pay on their public debt. Moreover, an influential paper by the American economists Carmen Reinhart and Kenneth Rogoff suggests that economic growth falls sharply when a country’s public debt rises above 90% ...