'Deadly Debt Crises: COVID-19 in Emerging Markets' - Presented by Cristina Arellano (Federal Reserve Bank of Minneapolis and University of Minnesota) - Joint PWC-ECO Macroeconomics Webinar
Friday 5 June 2020
Abstract: The COVID-19 epidemic in emerging markets risks a combined health, economic, and debt crisis. We integrate a standard epidemiology model into a sovereign default model and study how default risk impacts the ability of these countries to respond to the epidemic. Lockdown policies are useful for alleviating the health crisis but they carry large economic costs and can generate costly and prolonged debt crises. The possibility of lockdown induced debt crises in turn results in less aggressive lockdowns and a more severe health crisis. We find that the social value of debt relief can be substantial because it can prevent the debt crisis and can save lives.
Co-authors: Yan Bai and Gabriel Mihalache
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Online debate: Which (feasible) new Reconstruction Instrument(s) does Europe need? - An initiative of the Pierre Werner Chair at the EUI Schuman Centre, jointly organised with the Florence School of Banking and Finance and the Tommaso Padoa Schioppa Chair.
Wednesday 20 April 2020
To confront the COVID-19 crisis at the European level, the ECB has taken the lead with its Pandemic Emergency Purchase Programme (PEPP), to which other instruments have been added: EIB guarantees, the EC proposal for Support to mitigate Unemployment Risks in an Emergency (SURE) and, last week, the ESM’s new Precautionary Covid Line (PCL).
Nevertheless, there is widespread agreement – backed by the 17 April European Parliament resolution and 8 May Eurogroup statement – on the need to step-up the European response with a Recovery Fund and/or a well-structured Recovery Plan. The online seminar will focus on which are the most relevant European needs, and organisational forms, that a such plan should convey, in the light of the European Parliament initiatives and the – soon to be known – European Commission Recovery Plan.
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Intangibles, Inequality and Stagnation - A lecture by Prof. Nobuhiro Kiyotaki (Princeton University), organised in the framework of the Pierre Werner Chair Programme on Monetary Union
Friday 17 April 2020
We examine how aggregate output and income distribution interact with accumulation of intangible capital over time and across individuals. We consider an overlapping generations economy in which managerial skill (intangible capital) is essential for production, and it is acquired by young workers through on-the-job training by old managers. We show that, when young trainees are not committed to staying in the same firms and repaying their debt, a small difference in initial endowment and ability of young workers leads to a large inequality in accumulation of intangibles and income. Furthermore, a negative shock to endowment or the degree of commitment generates a persistent stagnation and a rise in inequality.
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D&D (Debt and Default) - Pierre Werner Chair mini-conference
EUI (Florence), 29 October 2019
In the aftermath of the euro crisis, there is a tendency to put debt issues on the back burner. However, debtlevels are very high in some European countries and elsewhere and, in fact, a possible default and/or debtrestructuring is at the forefront in Argentina, one of the world most experienced countries on D&D!
The Pierre Werner Chair mini-conference, which is part of a project co-funded by the European Stability Mechanism, discussed ongoing research on D&D. An open, informal discussion on the current situation in Argentina took place before the main conference.
12.00 - 13.30 Open debate: Argentina's Next Default? with Dr. Juan Pablo Nicolini (Federal Reserve Bank of Minneapolis) | More information
13.30 - 18.00 PWC Mini-conference on D&D | More information | Download the papers and presentations