Ricardo Cabral’s research while affiliated with The Centre of Applied Economics Studies of the Atlantic and other places

This study analyzes explanations identified in the literature for the subpar economic performance of the so-called peripheral member states of the Euro Area since the mid-1990s, comparing it to those of the core, catch-up, and financial hub member states. It argues that a key factor in the peripherals’ malaise was a financial Dutch disease-like mechanism, as the adoption of the euro led to large and sustained capital inflows. This resulted in a structural shift in the productive structure of peripheral economies away from technologically advanced manufactured goods, which are characterized by higher productivity growth. Consequently, peripheral member states specialized in non-tradable sectors, and in low-technology and labor-intensive tradable goods and services sectors, which largely explains the peripherals’ low economic growth, low productivity growth, and growing macroeconomic imbalances. Furthermore, this study argues that the economic underperformance of catch-up member states can also be explained by a financial Dutch disease mechanism.

This paper argues that the Banking Union increased bank capital requirements and tightened crisis response policy instruments, favoring bank resolutions or liquidations, while hindering bank bailouts. This framework had significant fiscal costs and redistributive effects, as it led to the application of resolution or liquidation measures to technically solvent or even adequately capitalized banks, sometimes contributing to bank runs. The paper argues that the resolution instrument results in arbitrage opportunities that might discourage market-driven acquisitions of failing banks. Finally, it argues that this issue could be partly addressed through a well-designed public bailout instrument.

This paper analyzes explanations identified in the literature for the subpar economic performance of the so-called peripheral member states of the Euro Area since the mid-1990s. It argues that a key factor was a Dutch disease-like transmission mechanism, as the adoption of the euro led to a capital inflow shock. This resulted in a structural shift in the productive structure of the peripheral economies away from technologically advanced manufactured goods, which are characterized by higher productivity growth. As a consequence, the peripheral member states specialized in non-tradable sectors, and in low-technology and labor-intensive tradable goods sectors, which largely explains the peripherals' low economic growth, low productivity growth, and growing macroeconomic imbalances.

This article analyzes the euro area’s banking sector regulatory framework, known as the Banking Union. It shows how distressed banks’ noncompliance with supervisory, state aid, or central bank lending policies can trigger the application of resolution or liquidation measures. Further, it provides new evidence on large banks’ distress episodes in the European Union and the United States, suggesting that recapitalization is a more cost-effective policy instrument than resolution or liquidation. Finally, it argues that the Banking Union lacks an appropriate recapitalization instrument for borderline distressed banks and that a more nuanced and structured stance on regulatory forbearance is probably warranted. This article is protected by copyright. All rights reserved.