Kristijan Kotarski | University of Zagreb (original) (raw)
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Università degli Studi "La Sapienza" di Roma
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Papers by Kristijan Kotarski
This article deals with fundamental concepts that are the prime cause of financial crises prolife... more This article deals with fundamental concepts that are the prime cause of financial crises proliferation such as fractional reserve banking system, overleveraging and structural imbalances created in such a fashion. It examines these issues in a completely new manner shedding the light on their alternative interpretation which contrasts conventional wisdom. Unchecked money supply is characterized as the main problem that causes overleveraging, which in turn reinforces property bubbles. The pattern of economic growth that is heavily dependant on rising debt is completely unsustainable. Inflation and increased
taxes in order to serve public debt obligations under the privately-owned fractional reserve banking system are not only its by-products but also its vital components. The very logic of the compound interest problem causes spiraling debt, which cannot be supported by constant economic growth that is limited
against the finite nature of Earth’s natural resources. Pending reform of the present monetary system is key to the solution of most contentious issues in the global economy.
Assessment of exchange-rate arrangements has become an integral feature of recent discussions on ... more Assessment of exchange-rate arrangements has become an integral feature of recent discussions on reform of the international financial architecture. The upshot of this recent interest in exchange-rate regimes is that a large part of the profession appears to have become converted to ‘the hypothesis of the vanishing middle regime’, for countries well-integrated into world capital markets, there is little, if any, middle ground between floating exchange rates and monetary unification. The literature on optimal currency areas emphasizes that policy independence is crucial if countries face recurrent idiosyncratic disturbances. If member-countries of the EMU show sizeable asymmetry in the timing of business cycle phases and their exposure to exogenous shocks, these countries may be better
off retaining their ability to conduct monetary and exchange-rate policies. Consequently, the important empirical issue is whether Europe is a region in which country-specific shocks prevail or whether shocks affect most of these countries in a similar way. Euroization is a relatively rare phenomenon. Yet in recent years it has attracted a lot of attention, which can be proved by an increasing number of studies dealing with this problem, as well
as an increasing number of countries taking this course of action. This paper deals with the advantages and disadvantages of euroization (dollarization), not only from the theoretical
aspect but also on the basis of experience of other dollarized countries. The unequivocal conclusion is that euroization (dollarization) is not a monetary policy instrument that can
be recommended to Croatia.
Euro crisis displayed its full blow in the spring of 2010. Its dynamics revealed deep-seated stru... more Euro crisis displayed its full blow in the spring of 2010. Its dynamics revealed deep-seated structural flaws at the core of the EMU. The productive Germany is tied via the euro currency union to countries that have lower productivity rates and inefficient economies. This union has been beneficial to the countries of Southern Europe so far since EMU inception, as it provided them with cheap credit. EMU showcased its problematic institutional design. Compared to mature federations, the institutional design of EMU is incomplete. On the
one hand, there is a strong ECB that decides monetary policies for the entire euro area. At the same time, there is a lack of macroeconomic policy coordination for the same area. The budgetary and fiscal policies are set by governments
of national states. This is of great concern for the vitality and robustness of the EMU in the context of soft constraints imposed by the Stability and Growth Pact. In the first part, this paper will highlight basic structural problems that led to the current crisis of confidence in the common European
currency. The second part intends to discuss the lack of monetary and fiscal policy coordination, while the third part analyzes monetary and fiscal responses to the crisis by the EU institutions and national actors. The fourth part seeks to portray some possibilities for overcoming deep-seated structural
imbalances, and questions the likelihood of “gouvernement économique” as a new stage in European integration.
This article deals with fundamental concepts that are the prime cause of financial crises prolife... more This article deals with fundamental concepts that are the prime cause of financial crises proliferation such as fractional reserve banking system, overleveraging and structural imbalances created in such a fashion. It examines these issues in a completely new manner shedding the light on their alternative interpretation which contrasts conventional wisdom. Unchecked money supply is characterized as the main problem that causes overleveraging, which in turn reinforces property bubbles. The pattern of economic growth that is heavily dependant on rising debt is completely unsustainable. Inflation and increased
taxes in order to serve public debt obligations under the privately-owned fractional reserve banking system are not only its by-products but also its vital components. The very logic of the compound interest problem causes spiraling debt, which cannot be supported by constant economic growth that is limited
against the finite nature of Earth’s natural resources. Pending reform of the present monetary system is key to the solution of most contentious issues in the global economy.
Assessment of exchange-rate arrangements has become an integral feature of recent discussions on ... more Assessment of exchange-rate arrangements has become an integral feature of recent discussions on reform of the international financial architecture. The upshot of this recent interest in exchange-rate regimes is that a large part of the profession appears to have become converted to ‘the hypothesis of the vanishing middle regime’, for countries well-integrated into world capital markets, there is little, if any, middle ground between floating exchange rates and monetary unification. The literature on optimal currency areas emphasizes that policy independence is crucial if countries face recurrent idiosyncratic disturbances. If member-countries of the EMU show sizeable asymmetry in the timing of business cycle phases and their exposure to exogenous shocks, these countries may be better
off retaining their ability to conduct monetary and exchange-rate policies. Consequently, the important empirical issue is whether Europe is a region in which country-specific shocks prevail or whether shocks affect most of these countries in a similar way. Euroization is a relatively rare phenomenon. Yet in recent years it has attracted a lot of attention, which can be proved by an increasing number of studies dealing with this problem, as well
as an increasing number of countries taking this course of action. This paper deals with the advantages and disadvantages of euroization (dollarization), not only from the theoretical
aspect but also on the basis of experience of other dollarized countries. The unequivocal conclusion is that euroization (dollarization) is not a monetary policy instrument that can
be recommended to Croatia.
Euro crisis displayed its full blow in the spring of 2010. Its dynamics revealed deep-seated stru... more Euro crisis displayed its full blow in the spring of 2010. Its dynamics revealed deep-seated structural flaws at the core of the EMU. The productive Germany is tied via the euro currency union to countries that have lower productivity rates and inefficient economies. This union has been beneficial to the countries of Southern Europe so far since EMU inception, as it provided them with cheap credit. EMU showcased its problematic institutional design. Compared to mature federations, the institutional design of EMU is incomplete. On the
one hand, there is a strong ECB that decides monetary policies for the entire euro area. At the same time, there is a lack of macroeconomic policy coordination for the same area. The budgetary and fiscal policies are set by governments
of national states. This is of great concern for the vitality and robustness of the EMU in the context of soft constraints imposed by the Stability and Growth Pact. In the first part, this paper will highlight basic structural problems that led to the current crisis of confidence in the common European
currency. The second part intends to discuss the lack of monetary and fiscal policy coordination, while the third part analyzes monetary and fiscal responses to the crisis by the EU institutions and national actors. The fourth part seeks to portray some possibilities for overcoming deep-seated structural
imbalances, and questions the likelihood of “gouvernement économique” as a new stage in European integration.