This article is based on the speech given for the Financial Forum Vlaams-Brabant in Louvain, January 30th, 2019.
Continuity is the goal of each transmission of a company. For such transition it is necessary to take into account the entrepreneurial aspects, but also the relationships within the family, the emotional and psychological impact. The fiscal treatment of a transmission is different for a gift and for a succession. Each company has different characteristics, so a case by case approach is appropriate.
Bilateral trade balances have become a growing focus of attention, as some policymakers are concerned that their large and growing size may reflect asymmetric obstacles to trade. A close examination of the drivers of bilateral trade balances, however, reveals that macroeconomic factors, rather than bilateral tariffs, have been the main drivers of growing imbalances. While tariffs have played a modest role in the evolution of bilateral balances, declines in tariffs have lifted productivity by allowing a greater international division of labor, including through participation in global value chains. A sharp increase in tariffs would therefore create significant spillovers, leaving the global economy worse off. From a policy perspective, our analysis suggests that the discussion of external imbalances is rightly focused on aggregate trade balances and the macroeconomic factors that drive them. Targeting particular bilateral trade balances with bilateral tariffs will likely mostly lead to trade diversion, leaving the aggregate trade balance unchanged. Instead, further multilateral reductions in trade barriers would benefit trade and, over the longer term, macroeconomic outcomes.
As an open economy, the euro area feels the consequences of the worldwide economic slowdown. But markets are not just pricing in a cyclical slowdown. Instead, interest rates and inflation expectations are reflecting a prolonged period of low structural growth and inflation. If markets are right, this would mean a secular stagnation. Just like Japan experienced since the bursting of its asset bubbles in the early nineties.
Undoubtedly, there are some similarities between Japan and the euro area. Among others, an ageing population, issues within the banking sector or higher private savings. On the other hand, the euro area (until now) avoided the deflationary environment. And it still has policy room to avoid a straightforward ‘Japanification’ of its economy.
Book review of Geert Noels’ “Gigantisme. Van too big to fail naar trager, fijner en menselijker”.
Report of the speech given by Philippe Colle, Managing Director of Assuralia and Professor at the Vrije Universiteit Brussel, for the Belgian Financial Forum in Antwerp on March 27th, 2019.
Recent economic indicators are not very encouraging for those hoping that inflation in the euro area will soon return to the ECB's 2% target. Economic growth decelerated sharply in 2018 and the previous acceleration in inflation was completely reversed in the final months of the year. Core inflation has not yet picked up, although stronger wage increases would have justified hopes of such a development. However, the slowdown in consumer demand growth has probably prompted entrepreneurs to reduce their profit margins rather than increase prices.
Low inflation in the eurozone also reflects the adjustment process whereby peripheral euro area countries continue to make up for competitiveness losses that occurred before the euro debt crisis. This is still not complete and implies that their inflation rates should remain below that of Germany. Consequently, as long as German inflation remains below 2%, average eurozone inflation cannot really get close to 2%.
A stronger stimulation of the German economy, and in particular of German consumption, could accelerate the process by stimulating German inflation. But such a stimulus is unlikely. A significant acceleration of German inflation to above 2% is therefore also unlikely. As other large euro area countries will have to keep their inflation levels below German levels for a long time to come in order to restore their competitiveness, a return to average inflation in the euro area close to the ECB's 2% target is likely to be a very long-term effort.
This is a report of the panel discussion, following the masterclass of Mathias Dewatripont, at the Universiteit Antwerpen, on April 4th, 2019.
Masterclass at the Universiteit Antwerpen, April 4th, 2019.
This is a report of the conference on ‘Quantitative Easing’, organised by Het Financieel Forum West-Vlaanderen, which took place on April 2nd, 2019 in Kortrijk.