May 9, 2019
Greek bonds now yield less than Treasurys, and that’s as irrational as it was in 2007
The current exuberance is another instance of “déjà vu all over again.” We are amid the same euro-area irrationality as in July 2007, just before the start of the global financial crisis. The right question today is not why the eurozone will have a crisis. Rather, the right question is why won’t the eurozone have a crisis soon.
May 2, 2019
Europe cannot escape nationalism
Europe is trapped in “confederation,” which is an inherently unstable organizational form. Conflicts among member states, especially on monetary and fiscal policy as well as on foreign and immigration policy, are built in. The conflicts generate continued acrimony and quickly turn ugly. The nation-state is the only organizational form that has democratic accountability and legitimacy. Since a genuine European federation is impossible in any foreseeable future, European leaders must retrace their steps, diminish the reach of European institutions and strengthen a trustworthy nationalism inspired by social democratic principles.
January 14, 2019
The ECB's performace during the crisis: Lessons learned, with Milan Nedeljkovic
Central bank interventions are effective if they clearly signal a commitment to reinvigorating the economy and if they address the source rather than the symptom of financial stress. The ECB did not follow these principles, limiting its ability to improve financial market sentiment.
December 21, 2018
Britain has always felt awkward in the EU, so its exit is sure to be bitter and chaotic
A “no-deal” Brexit is highly likely, if not now, then soon enough. Nobler claims that European unity is necessary to preserve international peace and promote democracy have never moved the British. Europe still is an important trading partner but its continuing decline is reducing its transactional value. Britain’s long-held pride in parliamentary sovereignty will tilt the balance in favor of breaking firmly from the EU.
November 12, 2018
Fall of the eurozone's saviours: Why Emmanuel Macron is following Matteo Renzi's path to political oblivion
They inherited poorly performing economies and could not come up anything more imaginative than “labor market reforms.”
November 2, 2018
Angela Merkel's Tragedy
History placed Merkel amid raging storms. Merkel held the ship steady, but the storms continued to rage. Future chancellors could easily be swept away.
October 26, 2018
Italy's Budget Isn't as Crazy as It Seems
European officials should quickly reconsider their position. In this perilous global economic and political environment, failure to pursue a constructive discussion could precipitate economic and political disaster. On the other hand, changing the narrative to give legitimacy to a modest Italian stimulus will reassure investors and calm the markets.
October 16, 2018
The IMF is having a 'Groundhog Day' moment with its economic forecasts
The IMF keeps making the same mistakes with its economic forecasts.
September 21, 2018
The ECB's bond-buying program was a flop, and that's perilous for the eurozone
Economic growth is slowing, and the ECB has hit its political limits.
September 1, 2018
The IMF abetted the European Union's subversion of Greek democracy
The Greek story is not a story of unfortunate technocratic errors. Rather, it is about a colossal failure of accountability in international governance. The IMF, sitting at the pinnacle of international governance, committed the same errors again and again within the course of the long Greek operation even though the evidence was there to behold. For the delusional austerity required by the IMF and European lenders and for, in effect, creating a modern economic colonialism in Greece, it is only right that the IMF display leadership by being the first to forgive Greek debt.
August 18, 2018
Brexit is the consequence of low upward mobility
The referendum gave British citizens an opportunity to pointedly express their pessimism about the future in a way that is not possible in general elections.
August 16, 2018
Italy must wake up, and fix its banks
The storm will, as it always does, cause the maximum havoc where the structure is most fragile: the banking system.
July 31, 2018
Recovering human dignity: Richard Bernstein on the relevance of Hannah Arendt today
Arendt’s message of the importance of direct democracy as a counterweight to aloof and self-interest-ridden representative democracy surely deserves close attention.
July 4, 2018
Why Italy could be facing a disastrous new recession
Even if the Chinese economy merely slows down global trade deceleration will continue and if, in addition, the global trade war escalates, global economic conditions could deteriorate rapidly. Italy will face the ill-effects of a global slowdown most acutely.
June 28, 2018
Brexit is a done deal—but the social and economic wounds that led to it have not been healed
Prime Minister Theresa May, at first, recognized the true message of the Brexit vote, but rather than move toward a Britain that “works for everyone,” she quickly got sucked into Brexit negotiations.
June 11, 2018
Italy never should have joined the euro, and the ECB can't rescue it from its next crisis
The new Italian government’s policy priorities are obviously at odds with budget realities. But quite simply, once Italy misguidedly entered the eurozone, a tragedy was fated. With its large size and deep vulnerabilities, Italy could push the eurozone and the world on to the wrong side of the tipping point.
June 8, 2018
New Books Network Podcast
EuroTragedy: A Drama in Nine Acts
June 1, 2018
German social democrats have alienated their base and fractured Europe
The decline in poll numbers of social democrats throughout Europe led me to ask what is the interaction between social democracy and European integration. In this piece, I argue that the decline of Germany’s Social Democratic Party offers the best perspective in understanding why European social democratic parties have lost credibility at home and how the euro has pushed them into narrowly nationalistic positions, deepening the European political divide.
May 29, 2018
Bloomberg TV Interview
ECB's Draghi Ran Out of Ammunition for Italy, Academic Mody Says
May 29, 2018
Italy's President Just Undermined the Euro
Mattarella and his advisers are trapped in a European groupthink, which denies Italian citizens a voice in running their own country and rules out sensible compromises. In trying to preserve European orthodoxy, they may unleash destructive forces that they can't control.
April 25, 2018
The myth of Franco-German friendship
Since Emmanuel Macron’s election as French president in May 2017, hope has lingered that a mythical friendship between France and Germany will help complete the gaps in the euro area architecture. As this column discusses, however, history provides no basis for such an expectation. National interests, always central to the decision calculus, have diverged even further. French leaders have a pressing task at hand: they need to rejuvenate their own economy and build domestic social cohesion. This may take a generation or more.
March 21, 2018
The euro area's deepening political divide
Two recent European elections – in Germany on 24 September 2017 and Italy on 4 March 2018 – warn that the peoples of Europe are drifting apart. Much of the recent deepening of these divisions can be traced to Europe’s single currency, the euro. The political divide in Europe may now be hard to roll back absent a shift in focus to national priorities that pay urgent attention to the needs of those being left behind.
February 3, 2017
The IMF Should Get Out of Greece
The IMF and Greece's European creditors have been trapped in the same tangle for nearly seven years. The IMF has a choice: to forgive Greek debt and leave the country honorably, or to continue to shred its credibility.
January 30, 2017
Playing with Economic Matches
The fragile global economy is a tinderbox with hotspots in China and Italy. The Trump administration adds disrespects for international rules and, through personalized economic policy making, undermines even the basic principles of a market economy. A match carelessly lit--whether in Rome, elsewhere in Europe, or in Washington, D.C.--could start a global wildfire.
January 17, 2017
Finance and growth: The direction of causality
Especially since 1990, and was particularly so in the Eurozone, the growth of the financial sector has been associated with weaker economic growth. While this could mean, as some say, that more finance hurts the economic growth potential, we argue that it at perhaps more the case that slower growth has induced rapid financial sector expansion. Policymakers who are trying to recapitalize banks to increase credit flows need to be aware that the problem is not too little credit, but perhaps too much—often to unproductive purposes. Weak banks need to be closed down rather than recapitalized. Eilyn Yee Lin Chong, Ashoka Mody, Francisco Varela Sandoval
January 10, 2017
Note Band and the Allure of Authoritarian Populism
Since there is no possible economic reason for India’s demonetization, Michael Walton and I argue that it is a testing ground for authoritarian populism. By appearing to take from the rich and promising goodies to the poorer, the effort is to establish direct connection with the people. In the process, the Reserve Bank has been grievously damaged, and Indian democracy has been placed at risk.
January 5, 2017
The economic consensus was horribly wrong and here at the real reasons Brexit is succeeding
Data from the last six months show that not only have the initial catastrophe forecasts proven untrue, but the economy has performed better than all expectations. An even bigger political prize is an office.
November 18, 2016
Unwinding of the pound carry trade
Between the first quarter of 2013 and the end of 2015, London property prices rose rapidly, the exchange rate appreciated, and the current account deficit widened. This column argues that the rise of the pound was in fact a financial bubble, riding on a property price-exchange rate carry trade. This unsustainable bubble was deflated by Brexit.
October 13, 2016
Europe after Merkel
The proposition is that the next German Chancellor will not also be de facto European Chancellor. Even if Angela Merkel returns as German Chancellor, she will be diminished and not be able to fill the political governance vacuum in Europe. This will be an opportunity for Europeans to practice "responsible nationalism," a phrase recently coined by Larry Summers. Failure to do could tear Europe apart.
October 10, 2016
Don't believe what you've read: the plummeting pound sterling is good news for Britain
Why the pound's depreciation is good news for Britain.
August 3, 2016
Are We Losing the Race?
Despite optimistic rhetoric, India's failure in critical areas--dying water resources, failing education, and imploding cities--could overwhelm the nation's aspirations.
July 13, 2016
Stop Being So Gloom About Brexit
The best thing Mark Carney can do is signal a return to normalcy by holding back on monetary stimulus.
July 5, 2016
Brexit: At the Crossroads of History
The real tragedy would for Britain would be if--having pulled out of a fading and brittle Europe--new leadership proves even more inept than past leaders at delivering on the true demands of those who voted for Brexit.
June 21, 2016
Drop the U.K. Panic Talk and Protect Global Markets
A chapter in post-War European and global history is coming to a close. How the event is remember will depend on the wisdom of the present stewards of the global economic and financial systems.
May 31, 2016
Why the economic consensus on Brexit is flawed
The case for lost trade does not hold up and the BOE's narrative is out of line.
April 14, 2016
The ECB can make a difference if deeds match words
with Nick Ligthart
We argue that when credibility is lost, central bank ammunition is wasted. Credibility requires proactive action with words used in support—not reassuring words that are followed by half-measures. Wolfgang Munchau at Eurointelligence summarized our piece this morning; I reproduce his blurb since I can’t do any better:
Nick Ligthart and Ashoka Mody write that the problem with the ECB's monetary policy is not one of diminishing returns, but one of settling for low returns in the first place. They call the ECB's focus on commodity prices a distraction, and criticise the way in which the ECB's commitments are often qualified, which makes them sound half-hearted. The ECB also acted late relative to the US Fed, for instance on QE, and as Mody and Ligthart put it a policy taken late is a policy not taken. They point out that euro and dollar core inflation started to diverge in 2013, though it seems the start of QE in Europe arrested the fall of core inflation. However, core inflation is now rising in the US and the difference is again as big as it ever was. Ultimately, despite the constant reassuring words of readiness to act, the ECB's half-measures have resulted in an actual loss of credibility. Coupled with restrictive fiscal policy causing low demand, it is no wonder core inflation is as low as it is in Europe. Unless there is a fiscal stimulus and the ECB matches its words with deeds, they conclude, the eurozone will remain stuck in a low growth, low inflation state, in which the high levels of debt threaten a debt-deflation spiral.
You might also find of interest our discussion of the divergence in inflation rates within the euro area, which we use to conclude that demand is the real problem.
April 9, 2016
Saving the IMF
Since the start of the Great Recession in mid-2007, the IMF’s actions have mostly served the interests of its major shareholders. When finance ministers and central bank governors meet in Washington, DC, next week for the Fund’s annual meeting, will they have the energy to push for greater independence and credibility?
Real reform requires replacing the Fund’s Executive Board, which represents shareholders, with a board of independent, professional directors, in the manner of the Bank of England’s Monetary Policy Committee.
At the same time, Berkeley’s Barry Eichengreen has rightly argued that the Fund must use “its bully pulpit to warn of risks created by large-country policies,” a task it has shied away from, “wary of biting the hand that feeds it.” With its “universal membership” and “expert staff,” the Fund, Eichengreen says, is the natural candidate for this task.
It is time, therefore, for the IMF to put away its growth forecasts and focus on risk profiling. Global fault lines and their implications should be presented to a committee of finance ministers and central bank governors, preferably in public hearings, just as central bank chiefs report to their parliamentary committees.
Likewise, on sovereign debt, Eichengreen makes the case for privately negotiated “contingent convertible” debt contracts with measurable triggers that automatically pause repayments. Thus, instead of seeking the authority to pull the standstill triggers, the Fund should promote the use of such contingent instruments. It can require its borrowers – soon, hopefully, it will be time for Greece – to issue new bonds on this basis.
In its 70 years, the Fund has adapted only within the confines of its post-World War II structure. The convulsions of the past decade revealed that this is not enough: The IMF’s technocratic strengths are easily undermined by political pressures. At every critical juncture, powerful national interests weighed in and skewed policy. Continuing on this path will lead to institutional atrophy. For their own sake – and that of an institution that is needed today more than ever – the Fund’s major shareholders must leave the building.
March 3, 2016
Why Boris Johnson is Correct about Europe
On Brexit, Johnson is on the right side of history.
February 28, 2016
Folly of Relying on a Dubious Recovery
Ireland must grow up and grow out of a corporate tax system that works at the expense of others.
January 27, 2016
The Market's Troubling Message
Markets might not be overreacting, don't ignore the market's troubling message.
January 4, 2016
Another Slow Year for the Global Economy
Global growth likely to disappoint because global bubble is still bursting and productivity growth is low.
October 19, 2015
Clueless in Europe
With the global economy set for slowdown and further disinflation, the ECB--as in the past 7 years--is again falling behind the curve.
August 27, 2015
When Crisis Comes Home
When the rolling global crisis gets to China, India will also go into a swoon.
August 16, 2015
Budgeting for Absolute Power
Germany is making a renewed big for greater control of other member states' fiscal affairs, an effort that the ECB finds entirely congenial. The premise is that such tightly centralized governance will establish a viable Europe. History is not kind to this premise.
Also appeared in the Handelsbald
August 13, 2015
Euro Area Banks Remain Vulnerable
It is well past time to aggressively restructure, consolidate and close the weakest euro area banks. Failure to do so will act as a drag on economic recovery, much as it did in Japan.
Appeared in Handelslbatt
Appeared in II Sole
A longer version appeared in voxeu.org as:
Still Vulnerable: Europe's Small-and Medium-Sized Banks
August 6, 2015
Wolfgang Schäuble, Debt Relief, and the Future of the Eurozone
In relief on official debt becomes legal, the eurozone will, in effect, have authorized a Eurobond.
August 1, 2015
Delhi's Children Deserve Quality Education
If AAP's only achievement with its stunning mandate is to promise a serious start in life to every child in Delhi, it would have honored the aspirations that brought to it power.
July 17, 2015
Germany, Not Greece, Should Exit the Euro
Germany has become an economic albatross and a political bully; best if it left.
July 14, 2015
Professor Blanchard Writes a Greek Tragedy
The deal hammered out this past weekend--if it is a real deal--remains defiant of economic logic, and the likelihood is high that Greeks will suffer more pain and the creditors will eventually see less of their money. That ultimately is the Greek tragedy.
July 13, 2015
The Birth of European Macroeconomics
Politics defined economics to give birth to the European macroeconomics of austerity.
July 4, 2015
In Bad Faith
By delaying the release of analysis showing that Greece needed debt relief, the creditors negotiated on bad faith.
June 18, 2015
A Program for Greece: Follow the IMF's Research
The strategy of relief to Greece doled out is driblets will cause unending pain to the Greeks and will require ever-increasing relief from the creditors.
June 11, 2015
David Cameron and the EU's Waterloo
Without a new unifying objective, the European amins will soon be out of business.
April 21, 2015
The IMF's Big Greek Mistake
Oddly, the IMF's way forward for Greece remains unchanged.
February 19, 2015
Greece and the André Szász Axiom
A European compromise is agreement on words that mean different things to different people.
February 5, 2015
Obama Joins the Greek Chorus
If Obama's words are to count, he must continue to push for the kind of deal Greece needs -- one that errs on the side of too much debt forgiveness, rather than too little.
January 26, 2015
Retaking the Greek Test
Greece has been giving Europe a test in economics and politics--the test must be retaken till the right answers are produced.
January 13, 2015
Nod-and-Wink Lender of Last Resort
Appeasing markets and living within the European Treaties creates that the market will test the ECB's world and resolve.
December 29, 2014
No Map for Growth
The G-20 leaders' are clueless about how to jump start growth or prevent the next crisis.
December 23, 2014
Greece to the Eurozone's Rescue
Forgive the official debt and create a credible no bailout regime going forward--and, Brussels, back-off from political interference.
December 3, 2014
The ECB's balance sheet, if needed
The EBC has become mainly a safety net with dealing with near-insolvency conditions.
October 31, 2014
Testing the Eurozone's Safety Net
Simply put the eurozone is fragile and without a reliable safety net.
October 28, 2014
Are the euro area's fiscal rules dying? If so, good riddance
The reason to be cautiously optimistic is that the French and Italian revolt may encourage new challenges from other countries.
October 10, 2014
Too late to do too little
The panic may have gone but the euro-zone in worse shape than at the start of the financial crisis.
Italian Version PDF
Mazzolini-Mody - Nog meer staatsschuld - NRC_20141014 PDF
Handelsblatt Too Little too late October 30 PDF
El Mundo - Bruegel PDF
October 2, 2014
Making Argentina's Debt Debacle a Rarity
Contractual provisions for automatic extensions of debt repayment is sensible economics.
September 9, 2014
The OMT's fragile foundations
The OMT is a technocratic solution to a political problem. For that reason it is politically fragile.
September 9, 2014
Why does Italy not grow? with Emily Riley
Italy is in a trap of low growth and weak investment in education and innovation, in an aging population.
August 21, 2014
Italy in a Vice
The parsing of the word "flexibility" continues.
August 7, 2014
The Global Economy's Groundhog Day
Tougher economic competition, slower growth, and low inflation may be here to stay.
August 5, 2014
Modi has promises to keep
The government has neither the mental model nor the political courage to effect real change.
July 1, 2014
Aligning National Interests in Europe's Monetary Union
The key stumbling block has always been achieving an alignment of national interest with European interests.
June 27, 2014
Europe has Wasted a Good Crisis
Do the recent elections warn that Europe is drifting apart?
**This also appeared in Les Echos
Handelsblatt Falling Forward Mody 17.6.2014.pdf
Europe has wasted a good crisis Napi Gazdaság 07 02.pdf
June 12, 2014
The IMF's False Confession
The question must be asked: Why does the IMF exist, and for whom?
May 15, 2014
Will Voters Turnout in the 2014 European Parliamentary Elections?
Will voters turnout to reaffirm a European vision, or are more tangible economic benefits are needed for that confidence to emerge?
May 13, 2014
Story of a Fraying Capitalism in India
How Piketty may apply to India.
May 10, 2014
The German Court Does Europe a Favor
The German Court has asked tough questions, which the European Court will need to address with the seriousness they deserve.
The German Court Does Europe A Favour-English.pdf
May 6, 2014
The ECB must-and can-act
The ECB must stop fretting about its limits and start buying US Treasuries.
April 15, 2014
Beware the saviour fantasy
The obsession for a 'strong' leader can prove dangerous as leadership changes in a democracy rarely have beneficial economic effects.
April 14, 2014
Europe's Deepening Muddle
Europe has anointed Germany its presumptive hegemon, a role that Germany relishes but its unable to pay.
March 31, 2014
From Mediocrity to Gold
India may be losing the urge to aspire.
March 1, 2014
Matteo Renzi has to break Italy from its past
Italy needs audacious investment financed, in party, by renegotiating with its creditors.
February 11, 2014
The ECB's Bridge Too Far
With the lira eliminated, holding down yields of Italian sovereign debt can be a fool's errand.
February 10, 2014
Europhoria Once Again
Is the fall in sovereign risk premia a sign of confidence or are investors assuming they will be bailed out?
January 30, 2014
The ECB is much too stodgy
If the ECB does not reinvent itself for the times, it will be hobbled by its obsolescence and by increasingly acrimonious politics.
January 7, 2014
The Ghost of Deauville
The decision to go back on Deauville was based on a superficial reading of the data.
January 2, 2014
Let's not wait for a saviour
Could a democratically-led change in governance fight corruption and help invest in the future?
December 30, 2013
Reversing a year of stagflation
Exchanging traditional roles, the RBI should foster growth through exchange rate depreciation, and the government should bring its budget under control to tame inflation.
December 10, 2013
The Looming Lost Decade
A coordinated global public investment drive is needed to pull the world economy out of its stupor and boot long-term growth.
October 9, 2013
Trade is the true test of the world's green shoots
Week international trade is spreading global woes.
Trade is the true test of the world’s green shoots - FT.com_.pdf
September 16, 2013
A New Greek Test for Europe
Greece is set to test Europe again.
August 9, 2013
A Bet with no Upside
A strong rupee policy will deepen the very vulnerabilities it is trying to ward off.
bet with no upside pdf
August 9, 2013
A Sharper Policy, a More Dynamic Bank
Raghuram Rajan's has formidable gifts but limited degrees of freedom.
July 4, 2013
The Rupee's Wake-Up Call
Will the wake-up call be heard?
June 13, 2013
Latvia in the Eurozone: A bet with no upside
Why the rush for Latvia to become the 18th member of the Eurozone?
May 27, 2013
Germany Must Lead by Example
Germany cannot pay the bill for Europe but it can lead by fixing its own banks.
May 23, 2013
Misreading the Global Economy
Persistent optimism reflects a serious misdiagnosis of the global economy's troubles.
May 6, 2013
What Type of Crisis for India
India flirts with crisis risk.
What type of crisis BS.pdf
March 21, 2013
Rolling the Dice in Cyprus
Another display of reactive and ad hoc decision-making in the Eruozone.
March 5, 2013
A Rest Stop for Europe
Stepping back today could ultimately help advance the euro project.
February 13, 2013
Promissory Notes Deal Welcome but it's Not Enough
The Eurozone's inevitable march towards official debt restructuring.
February 5, 2013
The Post-Growth World?
The Scarlett O'Hara mantra, "tomorrow will be a better day," does not work for policymaking.
January 17, 2013
The Inflation Elixir
Inflation helps the Indian government maintain a system is that is regressive, erodes competitiveness, and is inimical to reforms.
The Inflation Elixir.Pdf
January 16, 2013
A Breach in the Eurozone Dike
A solution to the eurozone crisis that relies on Germany has always been politically uncertain. It may soon become economically untenable.
December 12, 2012
Greece's Bogus Debt Deal
The Greek rescue in an alternate reality.
November 14, 2012
Time for euro zone to revisit debt default option
In this I argue that the heavily-indebted Eurozone economics are heading to a default because sharing the burden is politically ruled out: Better to recognize it now and deal with it.
November 14, 2012
Missing Growth Multipliers
In this I make the case that, with Europe as the epicenter, global trade linkages are spreading economic woes, which is why global growth projections are missing the deceleration.
October 10, 2012
The Eurozone's Narrowing Window