Francesco Paolo Mongelli

Conflict and Social and Political Preferences: Evidence from World War II and Civil Conflict in 35 European Countries

This paper uses new micro-level evidence from a nationally representative survey of 39,500 individuals in 35 countries to shed light on how individual experiences of conflict shape political and social preferences. The investigation covers World War II and recent civil conflict. Overwhelmingly, the results point to the negative and enduring legacy of war-related violence on political trust and perceived effectiveness of national institutions, although the effects are heterogeneous across different types (external versus internal) and outcomes (victory versus defeat) of conflict. Conflict spurs collective action, but of a dark nature, one associated with further erosion of social and political trust.

Investment and Growth in the Middle East and North Africa

The paper considers investment and growth in the Middle East and North Africa (MENA) region. Notwithstanding cross-country differences, investment as a whole has been too low, too heavily tilted toward the public sector, too highly dependent on external influences, and less productive than in many other regions. Improving the region’s investment performance is critical if policymakers are to succeed in increasing the region’s economic growth rate. After discussing the relationship between investment and growth, the paper analyzes the investment responsiveness of various countries in the region and notes the policy priorities for strengthening the basis for rapid and sustained economic growth.

How are the Eurosystem's Monetary Policy Decisions Prepared? A Roadmap

The monetary policy framework of the Eurosystem has received considerable attention in recent years: there is a well-established and rich literature on the price stability objective, as well as the two-pillar strategy of the ECB. This is less the case for the regular monetary policy preparations and the decision-making process. This article provides an insiders roadmap to the procedures to prepare monetary policy decisions by the Governing Council of the ECB. The architecture of the Eurosystem permits the processing and analysis of a vast amount of national and aggregate economic, financial and monetary data and assists the Governing Council in taking monetary policy decisions – and this each month. Our aim is to describe the role of a variety of committees and sub-committees that prepare and support the monetary policy decision-making process. A federal organization is at the heart of this process. At the top of the pyramid of information there is a two-tiered committee structure with the Executive Board taking the lead in bringing together most of the economic, financial and monetary analyses, and the Governing Council utilizing that information, for its monthly economic and monetary analyses.

Responses to the Euro Area Crisis: Measuring the Path of European Institutional Integration

Abstract The euro area crisis has exposed flaws in the institutional framework of the European Economic and Monetary Union (EMU). The immediate causes of the crisis have been widely debated — including weak governance, persistent erosion of competitiveness in some countries and easy financing by banks. However, there is little discussion about a fundamental shift in the nature of European integration, which took place in mid-1990s when plans for launching the euro became credible and binding. It was not understood that Europe had shifted from a Common Market Era, during which EMU’s foundations were laid, to a ‘Union Era’ which in retrospect exhibited an incomplete institutional framework. This article reviews the leap in governance now taking place, whilst taking stock of what has worked and proved resilient over the previous 60 years. This is done by means of an index — the European Index of Regional Institutional Integration (EURII) — providing a tool to synthesise and monitor European institutional integration since 1958, and track all institutional reforms since 2010. EURII has both backward as well as forward-looking components anchored on the project put forward in the 2012 Four Presidents’ Report.

EMU in Crisis: What’s Next?

EMU is in crisis. Yet, there is a firm willingness among policy makers to do whatever it takes to restore trust in the euro. Over the past two years, new EU institutions were introduced, the governance and supervisory framework was overhauled, and a new intergovernmental treaty was signed. Also at the national level, there appears to be a broader understanding of the need for bank restructuring, ambitious fiscal adjustments, and deep structural reforms. Still, the challenges that need to be addressed to restore EMU stability are manifold and formidable. While the transition process is difficult and will take time, the ‘old’ EMU is changing into a ‘new’ EMU at a pace which a few years ago would have been unthinkable.

Those Things You Might Not See, Which Are Still Beneficial

The euro area is slowly exiting a deep and prolonged economic, financial, institutional and confidence crisis. Several reforms and adjustment processes are underway. An aspect that is often neglected in this difficult period is that European integration has an “engine” which has withstood the crisis: over the last 60 years there has been a continuing deepening of trade in goods and services, foreign direct investment and financial links across EU countries. Such EU Internal Market is a diffused process advancing slowly but steadily, while generating a stream of benefits (with a caveat during the crisis). Four new components of the internal market are under way and are briefly introduced in this chapter. They are: the EU’s Digital Agenda, the Capital Market Union (CMU), the Payment System Directive (PSD), and Target-to-Securities (T2S). These elements are quite ambitious in their respective domains and need to be completed, understood, and widely adopted to exert their benefits, and boost the benefits from the euro. This is a big change in culture that is also supporting the change in EMU governance and political economy under way.

Monetary Policy Decision-Making by Committees Under Risk and Uncertainty

Monetary policy-makers face various types of uncertainty and these uncertainties are exacerbated during episodes of a financial crisis. Blinder (2004) suggests that monetary policy committees help to make better decisions in the presence of uncertainty. In this paper, we explore monetary policy decision-making under risk and uncertainty within an insurance model with expected utility-maximizing policy-makers. We assume that policy-makers are different in terms of their backgrounds, experience and skills and they may disagree on the appropriate policy response. In a monetary policy committee, they share information and decide on interest rates by means of an agreed voting rule. We derive under what condition committees are expected to take better monetary policy decisions than single policy-makers. We also show that, in the presence of risk and search costs, it would be optimal for policy-makers to fully insure against the expected loss from a potential policy error. In practice, whether a monetary policy committee sufficiently hedges against this risk, may depend on several factors such as the skills of policy-makers, members’ beliefs, and the committee’s (statutory) voting rule.