Volume 22, Issue 2

The Revised Statement on Longer-Run Goals and Monetary Policy Strategy, adopted by the Federal Open Market Committee (FOMC) in August 2020, contains two major changes from the original 2012 statement. Policy decisions would attempt to mitigate shortfalls, rather than deviations, of employment from its maximum level and the FOMC would implement Flexible Average Inflation Targeting (FAIT). In August 2025, the FOMC essentially returned to the 2012 statement. We develop and analyze policy rules consistent with the original and revised statements and show how prescriptions from inertial rules are much more in accord with Fed policy than prescriptions from non-inertial rules. The differences between non-inertial and inertial rules are much larger than the differences among various non-inertial and inertial rules. The prescriptions are identical between traditional and FAIT rules. The Fed policy following the Covid-19 recession is equally well described by rules in accord with the original 2012 statement as by rules in accord with the revised 2020 statement.

This contribution assesses the report of the European Parliament on the ECB’s activities in 2024. The report concludes that overstepping its secondary objectives touches upon the ECB’s independence. Although it is critical about high inflation, the report does not offer an assessment of the ECB’s delayed response to the inflation hike. The report suggests that the use of asset purchase programmes should be limited to instances of crises, thereby ignoring why central banks introduced these programmes in the first place. According to the report, the decision on whether or not to introduce a digital euro is ultimately a political decision that has to be taken by the EU co-legislators and not by the ECB.

Germany’s €1 trillion fiscal package marks a major shift in its economic strategy, with significant implications for both national policy and the euro area. This article critically examines the potential consequences of the fiscal expansion for debt sustainability, financial stability, and European fiscal coordination. It argues that without accompanying structural reforms – particularly in taxation, public investment, and demographic policy – the shift risks weakening long-term stability and undermining fiscal credibility across the EU.

This paper explores the second Trump administration’s withdrawal from the Global Minimum Tax (GMT) and the implications for the fiscal capacity of the EU and its member states. Agreed in 2021, the GMT seeks to limit profit-shifting by multinational corporations by ensuring they pay at least 15 percent in taxes no matter where they declare their profits. The GMT’s central features, the Income Inclusion Rule (IIR) and Undertaxed Payments Rule (UTPR), largely mirror provisions included in the US tax code by the first Trump administration. Following the neomercantilist turn of the second Trump administration, however, the US is pressuring the EU and OECD to abandon the UTPR. Given the urgent need to replace US security capabilities in Europe, modernize creaking infrastructure, and invest in the green transition, the paper argues that defending the GMT and the UTPR rule is crucial to protecting the EU’s fiscal capacity and sovereignty.

With a vision that comprises inclusive development, technological innovation, and alignment with global sustainability goals, India is on a path to sustainable growth, which aligns with the government’s vision of Viksit Bharat to attain the status of a developed nation by 2047. India is distinguished by its rich cultural legacy, outstanding economic achievement and diverse population. In this context, the study examines India’s goal of becoming a developed nation by integrating social, financial, and environmental advancement in an ecologically sound manner that includes all sections of society. The study examines India’s trajectory toward sustainable goals by analysing key sectors such as start-ups, health and education, green energy, skill development, and technological innovation. The findings contribute to understanding how strategic development in these sectors can empower all citizens and align India’s growth with global sustainability objectives, ultimately realizing the aspirations of Viksit Bharat.

The Trump administration has been following an “America First” doctrine, and concern about the implications of this shift for the future of the Bretton Woods institutions is heightened. This article describes what is at stake and uses insights from the literature on the political economy of international financial institutions to speculate about the costs of a US exit from the World Bank – for the Bank, but also for the US. The World Bank relies on the US for funding as well as favorable credit ratings. However, the US also benefits from the World Bank much more than often appreciated, as numerous studies have shown patterns suggesting US influence over most aspects of World Bank lending. The World Bank thus provides the US with an alternative channel for foreign policy that has proven especially useful when standard bilateral options are too costly.

The global aid system faces a structural crisis as shrinking donor commitments collide with rising humanitarian needs and intensifying climate pressures. Official development assistance is increasingly stretched across three overlapping mandates – crisis response, development, and climate action – creating tensions that risk undermining long-term development outcomes. This paper introduces an analytical framework for understanding these trade-offs, situating aid along two dimensions: time horizon (short-term vs. long-term) and scope of impact (local vs. global). Mapping recent aid flows against this typology reveals both complementarities, such as between development and climate adaptation, and sharp divergences, particularly in the cases of climate mitigation and crisis response. We argue that more effective aid management requires a strategic mix of selective integration, where mandates align, and purposeful disentanglement, where they diverge.

As the United States turns its back on multilateral trade rules, a critical question emerges: can the WTO survive without its most powerful member? While the US remains the world’s largest single importer, it accounts for only 13 percent of global merchandise trade. Hence, WTO members retain substantial economic interests in preserving multilateral trade rules for the remaining 87 percent of global trade. The central challenge is preventing American unilateralism from becoming a contagious example, as occurred during the interwar period. WTO Plurilateral initiatives and extending the network of (WTO-compliant) trade agreements offer promising pathways to maintain the credibility and utility of the rules-based trading system without hegemonic leadership.

The conflict between the Trump Administration and the Federal Reserve is the most serious threat to the independence of the central bank in three-quarters of a century. This article explains why – and what the Fed can do about it.

Whether America or China wins this competition depends on the avoidance of major policy failures. In China, the major challenge is that the regime must not forget the productivity of economic freedom and the benefits of decentralized decision-making. In America, the challenge currently is that the government must not forget the benefits of free trade and the value of foreign alliances.

Taiwan has been threatened by China for decades without a clear guarantee of protection from the United States. China’s anaconda strategy has contributed to a peak performance in Taiwan’s semiconductor technology which not only protects Taiwan by increasing the probability for protection by the United States. The shift of high-performance semiconductor production from Taiwan to the United States is unfeasible, because the necessary climate of threat cannot be reproduced there. Even more, diversifying Taiwan’s semiconductor production geographically would be undesirable, because geopolitical instability would rise.

Russian leadership for decades has been skeptical of the US-centric world, considering it both a threat to Russia’s sovereignty and the great power status. At the same time, the main goal of Russia appears to be less making Russia the new global leader and more creating a multipolar world with numerous power centers engaging in various alliances and conflicts. The war in Ukraine, due to the commitment of the Western nations and the US to support this country, is currently perceived in Moscow as a way to coming closer to this multipolar world. Whether this perception has changed under Donald Trump, is doubtful.

Following the suspension of new US aid to Ukraine in early 2025, European countries faced mounting pressure to fill the resulting gap. This paper analyses the extent to which Europe has responded, drawing on data from the Kiel Institute’s Ukraine Support Tracker Release 23. The findings reveal that European donors have significantly increased their support, allocating a record €26.9 billion in the first trimester of 2025, helping to offset the absence of new US support. However, this surge is unevenly distributed between countries and partly reliant on exceptional financing sources, such as interest from frozen Russian assets. Structural constraints, including limited defense industrial capacity, raise further questions about the sustainability of this effort. While Europe’s initial response is encouraging, its durability remains uncertain in the absence of structural reforms and more balanced burden-sharing.

The European Union is currently negotiating its 2040 climate target. But domestic emission reduction alone has no significant impact on tackling climate change. To be effective the EU’s pledge needs to be designed to catalyse emission reductions globally, particularly in the absence of ambitious commitments from the United States. To do so, the EU should leverage the buying power of its carbon-intensive industries, its diplomatic weight, and its experience with carbon markets. The article presents a proposal with three complementary pillars: ambitious domestic targets with some international flexibility, a robust architecture for international mitigation trading and the involvement of private money. Challenges to such an approach include how key stakeholders can be committed and encouraged and, at the same time, how effective governance can be ensured. The article responds to eight key concerns and makes the case for why international carbon trading, if used responsibly, can become a powerful element in the EU’s climate diplomacy toolbox.