Thursday, October 16, 2014

Surprises from the 2014 Global Wealth Report

1. Wealthy French:
"Although just 1.1% of the world's adults live in France, in terms of aggregate household wealth in current USD, it ranks fourth among nations --behind China and just ahead of the U.K. [...] This reflects the high average net worth of French households, rather than unusually high wealth inequality."
Here's a count of the world's millionaires, by country. France ranks second.

2. Wealth inequality fell, between 2000 and 2014, in: Switzerland, Denmark, Germany, Japan, Philippines, France, Colombia, Canada, Mexico, Malaysia, New Zealand, Singapore, Saudi Arabia, and Poland.
Moreover, among the G7, only the U.K. recorded rising inequality.

That's from Credit Suisse's Global Wealth Report 2014.

Wednesday, October 15, 2014

New paper on the mechanisms behind the eurozone crisis

Philippe Martin and Thomas Philippon have written a new paper about the mechanisms of private leverage and fiscal policy within the eurozone, from its creation through the Great Recession. (NBER link, ungated version).

From the introduction (emphasis mine):

There is wide disagreement about the nature of the eurozone crisis. Some see the crisis as driven by fiscal indiscipline and some by fiscal austerity, some emphasize excessive private leverage, while others focus on external imbalances, sudden stops or competitiveness divergence due to fixed exchange rates. Most observers understand that all these “usual suspects” have played a role, but do not offer a way to quantify their respective importance. In this context it is difficult to frame policy prescriptions on macroeconomic policies and on reforms of the eurozone.


...we propose a simple model that focuses on three types of shocks: household leverage, fiscal policy, interest rate spreads and exports. A key challenge is then to empirically identify private leverage shocks that are orthogonal to shocks on fiscal policy and shocks on spreads. To help us identify the eurozone shocks, we use the US as a control.


The key difference between the US and the eurozone experience is the sudden stop in capital flows starting in 2010 in the later.


Contrary to the eurozone, the US states did not experience any shock on spreads in borrowing costs and no fear an a potential exit of the dollar zone. This allows us, for the eurozone, to identify the part of the private deleverage dynamics that is not due to the spreads shocks by the private deleveraging predicted in the US on the period 2008-2012. We call this the “structural” private leverage shock.


Starting in the Spring of 2010, sovereign spreads widen and several European countries find it difficult to borrow on financial markets. The US and EZ experiences then start to diverge. While US states grow (slowly) together, eurozone countries experience drastically different growth rates and employment. A state variable that correlates well with labor markets performance in 2010-2011 in the Eurozone is the change in social transfers during the boom. Eurozone countries where spending on transfers (and also government expenditures) increased the most from 2003 to 2008 are those that are now experiencing severe recessions in the later stage. This suggests that in the second stage past fiscal policy, because of its effect on accumulated debt, had an impact on the economy through spreads and the constraint on fiscal policy it generated after 2010.


In this paper, we analyze a model where borrowing limits on “impatient” agents drive consumption, income, the saving decisions of “patient” agents and employment in small open economies belonging to a monetary union. We introduce nominal wage rigidities which translate the change of nominal expenditures into employment. We first consider the predictions of the model taking as given the observed series for private debt, fiscal policy and interest rate spreads between 2000 and 2012.
Maybe I don't understand the paper, but it seems to me that using U.S. states to identify the causal mechanisms is crucial. It also seems (and I might be wrong) that the identifying vehicle are the spread shocks. Now, there exist important differences between U.S. states and eurozone countries: fiscal, political, labor markets, cultural, etc. Insofar as those differences are not reflected in spreads or spread shocks, but played a role in determining the path of unemployment, deficits, etc., the identification strategy is flawed. Comments?

Putting those doubts aside, I love this paper.

Summary of main findings, from the conclusion:

1. The private leverage boom (in 2000-2008) was the key igniting element of the crisis, especially in Spain and Ireland.

2. Pro cyclical fiscal policy during the boom worsened the situation, especially in Greece.

3. In Ireland and Spain, a more conservative fiscal policy during the boom would have helped, but would have entailed an implausibly large fall of public debt.

4. A macro-prudential fiscal policy to limit private leverage during the boom would have stabilized employment in all countries. However, in the absence of more prudent fiscal policy, this would have induced a larger buildup in public debt.

5. Fiscal and macro-prudential policies are thus complements, not substitutes, in order to stabilize the economy.

6. The sudden stop in the eurozone worsened the crisis by further constraining fiscal policy. If the ECB's "whatever it takes" line had come earlier (and had been successful at that earlier time), Ireland, Spain, Greece and Portugal would have been able to avoid the latest part of the slump.

Tuesday, October 14, 2014

Interview with Jean Tirole, the Toulouse school, French economists

Les Échos relays today's interview (in French) with Jean Tirole, by Europe 1. Tirole opines talks about the future of France, the job market, the need for reforms, sovereign debt, the euro, and the role of industrial regulation.

Jean Tirole : l'assurance chômage "incite au... by Europe1fr

Also on Les Échos: The Toulouse school of economics.

I can't help drawing parallels between Toulouse's school of economics and Universitat Pompeu Fabra's (where I did my undergrad econ). Both are young schools, started in the 1990s with the ambition of becoming world class schools of economics, on par with the best U.S. schools. Both are located in the "periphery" of their respective countries. And both are mostly staffed by faculty with Ph.D.'s from U.S. schools.

And the most promising French economists, according to the IMF:

1. Xavier Gabaix (NYU)
2. Esther Duflo (MIT)
3. Emmanuel Farhi (Harvard)
4. Hélène Rey (LSE)
5. Emmanuel Saez (UC Berkeley)
6. Thomas Philippon (NYU)
7. Thomas Piketty (Paris School of Economics)

Friday, October 10, 2014

The slowdown of re-allocation (and productivity) in the U.S.

People are not losing low productivity jobs, becoming unemployed, and then getting high productivity jobs. People are staying in low productivity jobs, and new high productivity jobs are not being created. So the GR is not “cleansing”. It is, in some ways, “sullying”. The GR is pinning people into *low* productivity jobs.

This holds for firm-level reallocation well. In recessions prior to the GR, low productivity firms tended to exit, and high productivity firms tended to grow in size. So again, we had productivity-enhancing recessions. But again, the GR is different. In the GR, the rate of firm exit for low productivity firms did not go up, and the growth rate of high-productivity firms did not rise. The GR is not “cleansing” on this metric either.


In a related piece of work Davis and Haltiwanger have a new NBER working paper that discusses changes in workers reallocations over the last few decades. They look at the rate at which workers turn over between jobs, and find that in general this rate has declined since 1980 to today. Some of this may be structural, in the sense that as the age structure and education breakdown of the workforce changes, there will be changes in reallocation rates.

But what Davis and Haltiwanger find is that even after you account for these forces, reallocation rates for workers are declining. No matter which sub-group you look at (e.g. 25-40 year old women with college degrees) you find that reallocation rates are falling over time. So workers are flipping between jobs *less* today than they did in the early 1980s. Which is probably somewhat surprising, as my guess is that most people feel like jobs are more fleeting in duration these days, due to declines in unionization, etc.. etc..

The worry that Davis and Haltiwanger raise is that lower rates of reallocation lower productivity growth, as mentioned at the beginning of this post.


So we appear to have, on two fronts, declining dynamic reallocation in the U.S. This certainly contributes to a slowdown in productivity growth, and may perhaps be a better explanation than “running out of ideas from the IT revolution” that Gordon and Fernald talk about. The big worry is that, if it is regulation-creep, as Davis and Haltiwanger suspect, we don’t know if or when the slowdown in reallocation would end.

That is from The Growth Economics Blog, by Dietrich Vollrath, and it's worth reading in full.

Monday, September 29, 2014

What caught my eye

1. Labor under-utilization: We keep thinking, long and hard, about how much slack there is in the job market. Gavyn Davies brings our attention to a timely conference put on by the Peterson Institute. The "consensus" --at least as gauged by Davies-- is that the unemployment rate in the U.S. under-represents the true amount of slack, due to the effect of the participation gap and involuntary part-time employment. Moreover, because of long-term unemployment and the potential rise of productivity growth, a decline of labor slack need not be as inflationary as it normally would. Everybody, however, acknowledges the "great uncertainty" around these assessments.

The Peterson Institute has posted the videos and ppt files of all the conference presentations here.

2. "Grapho-tainment": Twenty-two maps and charts that will surprise you, by I love these: #1, #3, #7, #10, #15, #17, and #19.

3. Speech by Vítor Constâncio, vice-president of the ECB, on "understanding the yield curve." I liked this [emphasis mine]:
Moreover, high sovereign spreads in the euro area have raised the question of what is the appropriate yield curve to monitor. In an article in the July Monthly Bulletin we discussed this issue in the context of measuring the euro area risk-free rate. Should we use Bund yields, euro area average AAA rates or OIS rates, or does it depend on the matter at hand?

Incidentally, an intriguing question in a currency union is the following: if it is difficult to identify a risk-free rate in a currency union, this means that there is no risk-free asset either, besides the central bank's own liabilities, the currency
4. David Keohane at FTAlphaville shares a report by HSBC, on the uneven conditions for growth across states in India.

5. From this week's batch of NBER working papers [emphasis mine]:
We employ a model of precautionary saving to study why household saving rates are so high in China and so low in the US. The use of recursive preferences gives a convenient decomposition of saving into precautionary and non precautionary components. This decomposition indicates that over 80 percent of China’s saving rate and nearly all of the US saving arises from the precautionary motive. The difference in the income growth rate between China and the US is vastly more important for explaining saving rate differences than differences in income risk. We estimate the preference parameters and find that Chinese and US households are more similar in their attitude toward risk than in their intertemporal substitutability of consumption.
I find the statement in bold very, very hard to believe, given this.

The paper is by Horag Choi, Steven Lugauer, and Nelson Mark, and here's an ungated version.

Wednesday, September 17, 2014

Notable pictures: Dissent (or lack therof) within the FOMC

What explains dissent within the FOMC? Daniel Thornton and David Wheelock contribute a fascinating research note (pdf) to this quarter's issue of the Federal Reserve Bank of St. Louis Review. (A 2013 article by Mark Wynne at the Dallas Fed also touches on dissent and FOMC communications.)

A few highlights (selection and emphasis mine):

1) Ninety-four percent of all votes by FOMC members were cast in favor of the policy directive adopted by the Committee.

2) There have been relatively few dissents since the early 1990s.

3) Since 1936 overall dissents are roughly evenly split between presidents and governors (215 were issued by presidents of the regional Federal Reserve banks, and 194 by members of the Board of Governors). But since 2006, all of the dissents have been issued by presidents of the regional Federal Reserve banks, and none by governors. Moreover, since 1994, only four dissents were issued by governors, and about 70* by presidents (see chart below).

In Thornton and Wheelock's research note, the bit of statistical analysis focuses on the relationship between the dissent rate and inflation and unemployment. And in the note's introductory paragraphs, the authors say that, trying to explain the variation of dissent rates over time:
Our study suggests two main reasons for such variations: (i) differences in macroeconomic conditions and (ii) the level of disagreement among the Committee members about how to judge the stance of policy and how best to achieve the Committee’s ultimate objectives.
When I read the note, however, I get a feeling that institutional factors are behind the lion's share of those variations. The way the FOMC operates has changed dramatically over the decades. Let me show you a few examples, with quotes from the research note itself:

1930s and 1940s: The Fed cooperates with the Treasury

There were only a handful of dissents during FOMC policy votes between 1936 and 1956, all of which occurred between 1938 and 1940. 5 During World War II, the Federal Reserve pledged to cooperate fully with the Treasury Department to finance the war effort.

1950-1955: The executive committee

Federal spending and budget deficits increased when the Korean War began in 1950. Inflation began to rise and the Fed found it increasingly difficult to prevent interest rates from rising. With the support of key members of Congress, the Fed successfully negotiated an agreement with the Treasury Department, known as the Fed-Treasury Accord, in March 1951.


Differences among FOMC members soon arose over how to implement monetary policy to achieve the Committee’s macroeconomic objectives. However, until 1957, no member ever dissented on a policy vote. The absence of dissents in the early post-Accord years may have reflected, at least in part, how the Committee was organized and the nature of the policy directives issued by the Committee. The Banking Act of 1935 required the FOMC to meet at least four times per year. At that time, directives issued by the full Committee were vaguely worded statements that members may have found little to disagree with. An executive committee consisting of the Chairman and Vice Chairman and three other members met biweekly to issue operating instructions to the manager of the Open Market Desk at the New York Fed. Presumably, those instructions were in line with the desires of the full Committee.
1956-...: Full committee
FOMC procedures changed in 1955. In that year, the FOMC voted to abolish the executive committee and to meet more frequently—every three to four weeks, instead of just once per quarter. Beginning in 1956, at each meeting the full Committee voted on the operating directive to the manager of the Open Market Account, resulting in about 18 policy votes per year instead of the usual four votes in preceding years. The FOMC maintained this schedule until the early 1980s, when the number of scheduled meetings was reduced to eight per year.
1978-2000: Money stock targets
In 1977, the FOMC began to set annual targets for the growth rates of various money stock measures. Although the Committee’s operating directives continued to express policy in terms of money market conditions, they also specified the Committee’s long-run objectives and near-term expectations for growth of the monetary aggregates and an “operational objective” for the federal funds rate, which was usually a range of either 50 or 75 basis points.


The explanation given for dissenting votes in FOMC records indicates that dissenters sometimes disagreed with the Committee’s chosen growth rate targets for monetary aggregates, the tolerance range for money market conditions or the funds rate, or some other element of the broader directive.
1983-...: Forward guidance
In 1983, the FOMC began to include information in the directive about the likely direction of future changes in policy. Subsequently, some dissents were against the signaling statement rather than the current policy stance.
Unconventional policy
The frequency of dissents has at times been associated with the use of unconventional policy measures. For example, in the early 1960s, the FOMC abandoned its long-standing policy of conducting open market operations solely in Treasury bills. Some members opposed the move, as well as explicit efforts to simultaneously lower long-term interest rates while raising short-term rates—a policy sometimes referred to as “Operation Twist.”More recently, after the FOMC lowered its target for the federal funds rate to the zero lower bound in 2008, some members expressed skepticism about the use of certain unconventional policy measures, including “credit easing,” “forward guidance,” and “maturity extension programs” to ease monetary conditions further.

Explaining the break in the early 1990s

Another institutional change is the publication of the votes of the individual members of the FOMC--and this change might help explain the decline of dissent after the early 1990s, and the stark difference in the dissent rate between governors and presidents, also after the early 1990s.

I'm no expert on the institutional details of the FOMC, but I do know that the Fed started issuing statements announcing the outcomes of its meetings in February 1994. Prior to that, when the committee changed the monetary policy stance, it didn't announce it to the public. Instead, market participants had to figure out the change in stance by watching what the open markets desk did in securities markets after a meeting.

On February 4, 1994, under Greenspan, the FOMC issued its first statement. The statement consisted of three terse paragraphs, and it didn't identify who voted for or against the FOMC decision. Starting. however, with the meeting of May 17 of that year, the statement disclosed which presidents had submitted requests for a change to the discount rate, which at the time was a main operational target of the FOMC. For example, that month the statement revealed that the Board of Directors of the Cleveland Fed had not requested to raise the discount rate, whereas the other eleven regional banks had done so. That was, then, the first time the FOMC had published any hint of internal dissent immediately after a meeting.

On March 19, 2002, the FOMC started including in its immediate announcements the roll call of the vote on the FOMC decision, including the identities and preferences of dissenters, which I believe has been the custom ever since.

Could this increased transparency on the FOMC's internal disagreements explain (1) the decline of dissenting votes since the early 1990s, and (2) the almost total consensus among governors? Thornton and Wheelock themselves offer a hint to an explanation:
District Bank presidents are appointed by their local boards of directors (with approval by the Board of Governors), and Federal Reserve governors are appointed by the president of the United States and confirmed by the Senate. Some researchers argue that governors are thus more responsive to the desires of politicians (who must consider reelection)...
Thornton and Wheelock point to this institutional feature to suggest why presidents are more hawkish than governors. But I think the difference in how presidents and governors are appointed affects their incentives to dissent publicly. Governors (who face reelection by Washington) may be less willing to dissent if disagreement is frowned upon by politicians--who face an asymmetric information problem when assessing the performance of the governors. The regional presidents, on the other hand, might be closer to their boards of directors than governors are to politicians, or perhaps the regional boards of directors are more knowledgeable about monetary policy than Washington politicians are, reducing the information asymmetry between appointee and "appointer."

A second difference between governors and presidents is that the former are appointed for 14-year terms, throughout which they get to vote at the FOMC meetings. Governors have a lot at stake if they ruffle feathers often, or if they're perceived as "eccentric" or "self-centered". The regional presidents, on the other hand, vote at the meetings for just one year, after which they're replaced in the rotation by the president of a different regional bank. (Except for the New York Fed president, who always votes.)

A slightly different answer is that this consensus among governors is an endogenous response to the increased transparency about dissent: Governors not only say they agree more with each other, but genuinely agree more with each other. Fear of "sticking out one's neck" publicly might persuade governors to listen more to each other and to the chairman, which results in less dissent. This hypothesis begs the question of why the regional presidents, who aren't based in DC, don't try as hard as the governors to communicate with other FOMC members between meetings--unless you buy my previous hypotheses on varying costs of dissent.

All these hypotheses, however, require a measure of inattention, as the minutes have always disclosed dissent, but they're published weeks after the meeting.

*I don't have the dataset, so I'm reading off the charts on the research note.

Friday, September 5, 2014

Inflation in the eurozone: goods versus services

Giulio Zanella (hat tip to John Cochrane) writes a post suggesting that Italy’s deflation is mostly imported. He supports his idea with two observations. First, the price index of goods has declined, but the price index of services has increased (coincidentally, by the same percentage). Second, among goods, those whose price has declined are: unprocessed food, energy, tobacco, and consumer durables. The first three have in common, Zanella says, that they’re traded in global commodity markets.

Assume that goods are tradable in international markets, whereas services are non-tradable—a good approximation for a country like Italy, Zanella says. Then, he concludes, the origin of Italy’s deflation is international and on the supply side, whereas the contribution of weak domestic demand is “modest.”

In this post I look at the questions of whether eurozone deflation is really “imported,” and of how big the deflation threat is.

For the currency area as a whole, disinflation is a lot faster for energy and unprocessed food than for the other components of the HICP:

Within the “core” inflation rate, durable and semi-durable non-energy goods are in outright deflation, whereas non-durable goods are not:

The identification of the tradable component of the HICP with goods, and the non-tradable component with services is not accurate, but I’ll accept it for the sake of simplicity. (After all, the main drivers of services inflation should be domestic factors.) Extending this simplification to prices, goods deflation is “imported,” whereas services deflation is “homegrown.”

The distinction is important, among other things, because the optimal monetary policy response depends on the type of deflation. If deflation is imported, the ECB should do nothing, because commodity prices and the exchange rate are outside the set of things it can (or wants to) control. Let’s look, then, at the split of the HICP between goods and services.

The sub-index for all goods was falling at an annual rate of 0.3% as of July, whereas the price index of the basket of services was increasing 1.2%:

(Goods account for about 57.2% of the eurozone-wide HICP, and services for 42.8%.) 

Services inflation appeared to be declining from 2011 up until April 2013, and since then it’s been more or less flat around 1.2% (to zoom in, adjust the dates on the chart above).

It appears, then, that a large part of the eurozone’s current disinflation might be “imported.” Another, smaller part of this disinflation is “homegrown,” but it doesn’t seem to be getting worse.

What’s the evidence across countries?

Goods inflation has declined in every single of the 15 countries I consider*. In all but two countries, prices are falling outright.

Services inflation has declined overall, but slightly (from 1.4% in July 2013 to 1.2% one year later). In five countries services inflation rose: Belgium, Ireland, France, Portugal, and Finland. In one country, Greece, deflation became less pronounced. In two countries, Germany and Austria, the services inflation rate didn’t change. And in the remaining six countries inflation declined: Estonia, Spain, Netherlands, Italy, Slovakia, and Slovenia.

So far, then, I’d say the jury is still out on whether disinflation, for services, is continuing.

Clemente De Lucia, economist at BNP Paribas, just published a research note taking a deep look at services inflation. This is what I see, from the first section of his note (“Inflation decomposition”):

1. Services inflation in core countries (Netherlands, Austria, Luxembourg, Belgium, Finland, Germany, France) is higher than in periphery countries (Greece, Spain, Portugal, Ireland, Italy). In the “core” region, services inflation shows no apparent trend since early 2011, whereas in the “periphery” services inflation has been roughly flat since late 2013:

Source: Clemente De Lucia (BNP Paribas), July-August 2014.
De Lucia mentions how, in the core, the current inflation rate is “slightly below its historical average,” and that in Germany and the Netherlands the services inflation rate is below the eurozone aggregate (although barely so):

Source: Clemente De Lucia (BNP Paribas), July-August 2014.

2. "Lowflation” is spreading across services sub-categories, but deflation is less pervasive. To gauge the diffusion of disinflation and deflation, De Lucia looks at the percentage of the 39 sub-components of the services HICP that had an inflation rate between 1% and 2%, between 0% and 1%, and below 0%.

For the eurozone as a whole, the share of services sub-categories with inflation between 1% and 2% has shot up, but the share of services in deflation has declined (from a percentage that was never higher than 20%):

Source: Clemente De Lucia (BNP Paribas), July-August 2014.
The evidence by country varies. De Lucia focuses on the total proportion of services sub-categories with inflation below 2%. That statistic is rising, De Lucia notes, in Spain, Portugal, Greece, Netherlands, and France. From that he concludes that deflationary pressure is mounting in those countries.

(Beware that, in those charts, the three categories are nested. That is, the category of "below 2% inflation" includes the category of "below 1%" inflation, and so forth. I checked.) 

De Lucia's data end in May 2014. I gathered my own data to see what's happened over the past 12 months, for the eurozone aggregate. The proportion of service categories with inflation below 2% reached a maximum in February (70%), and has declined since then. The diffusion of deflation reached 18% in December 2013, and has fallen to about 5% in July.

It will be interesting to see a breakdown by country. So far, though, I'm not convinced that "domestic deflationary pressures" are mounting.

One interpretation of the ECB’s recent policies is that the bank is not reacting to today’s decline in the price of goods. Most of that is due to past declines in commodity prices—which the ECB has no control over— and to the past rise of the exchange rate—which the ECB doesn’t target. The ECB, instead, is reacting to the disinflation of services, and the risk (or expectation?) that it might turn into outright deflation. How serious is that threat?

Based on the (admittedly backward-looking) evidence surveyed here, the risk of "homegrown" deflation is there, but it's not increasing, imminent, or pervasive across countries. (De Lucia’s note continues with a promising, long section on inflation expectations, which I haven’t had time to read yet.)

A different interpretation is that the ECB sees deflation in goods as a problem it can solve—through the exchange rate. The euro appreciated steeply, through May, and that has driven the euro price of commodities lower. The new policies might be aimed at depreciation.

But that will have to wait for another blog.

*For visual clarity, I removed from the chart the three smallest members of the eurozone: Cyprus, Malta, and Luxembourg.

Thursday, September 4, 2014

Why QE might be a bad idea for the eurozone

Michael Heise, chief economist at Allianz, is against (FT) quantitative easing by the ECB. He thinks the ECB shouldn't go down the QE route, because:

First, the recent low inflation rates are in part a result of the decline in oil and other commodity prices. They also reflect necessary adjustments in the eurozone periphery. [...] There is no sign of a vicious circle of falling inflation expectations and consumer restraint. Inflation rates will gradually climb again as the economy recovers.

Second, although the ECB has several options when it comes to implementing QE, there are serious objections to all of them. Buying asset-backed securities or corporate bonds would expose the European taxpayer to credit risk.


Third, the impact of further monetary easing on output and price levels would be negligible. That is because the recession in many parts of the eurozone is caused by the hobbling effect of the unsustainable amounts of debt that were built up by public and private actors during the boom years. Over-indebted households and companies are unlikely to pile up more debt; on the contrary, they are trying to pay it down. This makes monetary policy ineffective.

Fourth, the collateral damage from ultra-loose monetary policy is accumulating. Risks to financial stability are growing as investors are piling into riskier assets in search of higher returns. Already, some assets such as junk bonds are trading at what look like inflated prices.

Fifth, further monetary easing would delay the much-needed adjustments in the balance sheets of European banks and companies. An abundance of cost-free liquidity from the central bank enables commercial lenders to continue propping up weak creditors.
Of those, I agree most with #1. A breakdown of the eurozone's consumer price index suggests that a good chunk of Europe's deflationary pressure is "imported," showing up in the price index of goods with a high component of commodities. The price index of services, on the other hand, many of which are non-tradable, doesn't indicate deflation. (More on this soon.) Yes, demand is weak, and the private sector is deleveraging, but a lot of the "deflation" problem has to do with declining prices of globally traded goods, and the appreciation of the euro between 2012 and 2014, which only started to reverse itself in May.

Of the other reasons offered by Heise, I agree with #4. I'm sympathetic with #3 (further easing will be ineffective), but I stress a different obstacle: banks are under pressure to clean up their balance sheets. In that sense, European policy is schizophrenic. On one hand, the ECB is trying to encourage more lending; on the other, regulators tell banks to improve their equity ratios.