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Regulating Digital Currencies: A Welcome First Step

Digital currencies—tradable digital assets stored on distributed ledgers—have finally caught the high-level attention of international financial policymakers. For the first time, finance ministers and central bank governors of the G-20 have called for coordinated action on digital or cryptocurrencies like bitcoin in their March 2018 communique. The communique states that "crypto-assets...raise issues with respect to consumer and investor protection, market integrity, tax evasion, money...

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The US Employment Rate Has Returned to Its Pre-Recession Level Adjusted for Aging

The US employment-population ratio—the share of the civilian population ages 16 and older that is currently working—has fallen from 62.8 percent in the fourth quarter of 2007 (the peak of the business cycle prior to the Great Recession) to 60.3 percent in the first quarter of 2018, a 2.5 percentage-point decline.1 While this decline is substantial, it is entirely the predictable consequence of the aging of the US population, as the movement of a larger fraction of the population into older...

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New Governments in Germany and Italy: Fears of Rampant Populism May Be Exaggerated

In their most recent elections, Germany has chosen continuity and Italy has taken a big jump into the unknown. In early March, German social democrats voted to support another grand coalition under the leadership of Chancellor Angela Merkel, while empowering anti-immigrant and far-left parties as the main opposition. At the same time, Italy's voters elected a new but hung parliament dominated by populist parties. In both cases, most media commentary has focused on the anxiety over surging...

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EU Member States Continue to Dictate Brexit

The Chief European Commission Brexit negotiator, Michel Barnier, is often described in the media as the source of the European Union's tough stance on the Brexit negotiations. But it is increasingly clear that EU member states and their chief representative, EU Council president Donald Tusk, former prime minister of Poland, are the ones tightening the screws on Prime Minister Theresa May's government over the terms of Brexit. In Dublin, standing next to the Irish prime minister, Tusk...

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Should We Expect a Rebound in TFP Growth? Insights from the 1930s

After growing at an annual rate of 1.4 percent between 1995 and 2007, total factor productivity (TFP) decelerated to an annual rate of growth of 0.4 percent between 2007 and 2016, raising concerns that the slowdown has been persistent if not permanent (Gordon 2016). Such a slowdown could have far-reaching consequences for economic development and a host of economic institutions. Whether the first estimate of TFP growth during 2017—to be released tomorrow by the Bureau of Labor Statistics...

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A Visionary Leader: PIIE Mourns the Passing of its Founding Chairman

The Peterson Institute for International Economics mourns the passing of its founding chairman, Peter George Peterson, who died March 20, 2018, at the age of 91. In a career of public service spanning more than five decades, Pete Peterson was a tireless champion of intellectually honest and rigorous, nonpartisan research and advocacy on international economic issues, the values pursued by the Peterson Institute since its founding more than three and a half decades ago. Pete Peterson began his...

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Breaking the Stalemate on European Deposit Insurance

In the wake of the European financial and sovereign debt crisis, the euro area embarked in 2012 on establishing a banking union. Its aim was to elevate parts of banking sector policy from the national to the European level, particularly bank supervision and resolution. Successive EU-level reports, including the Four Presidents’ Report of 2012 and the Five Presidents’ Report of 2015, have highlighted a European Deposit Insurance Scheme (EDIS) as a necessary component of banking union. In 2015,...

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The Missing Third Leg of the Euro Architecture: National Wage Negotiations

Euro area policymakers have been focused in recent years on designing better banking and fiscal unions, two important legs of the euro architecture. But their discussions miss a third essential leg, namely major improvements to the macroeconomic adjustment mechanism, which can only be achieved through national wage negotiations. The issue is not new. It dates back to at least the 1960s with Columbia University professor Robert Mundell's discussion of an optimum currency area. Mundell...

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Positive Signs in European Labor Markets in 10 Charts

The European Commission estimates the euro area economy grew at 2.5 percent in 2017, an upward revision of its previous estimates, suggesting that the pattern will continue in 2018. This trend is at least one percentage point above reasonable estimates of the euro area’s potential growth rate. The still subdued levels of headline (and core) inflation in the euro area remain well below the ECB’s target, indicating that significant unused capacity remains a problem after the euro area crisis....

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Janet Yellen’s Term as Fed Chair Was Uneventful—in a Good Way

The last meeting of the Federal Open Market Committee (FOMC) chaired by Janet Yellen, which took place on January 31, did not change the stance of monetary policy or make any meaningful changes from December in the policy statement. Jerome Powell, who has served on the Fed board since 2012, will take over as chair of the next meeting in March. Given that Powell has voted with Yellen at every meeting she chaired, there is little reason to expect much change in Fed policy. The fact that...

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