Economy & Markets

Edited by Donato Masciandaro and Gianmarco Ottaviano

Venezia
2020-10-07 Donato Masciandaro

Pandemic, Money, and Debt: the Lessons from the Serenissima Republic

The two largest central banks in the world – the FED and the ECB – have shared a common hope in recent months: that fiscal policy will be effective. There is a substantive difference, however: although the heads of the two institutions – Powell and Lagarde – have the same problem, the COVID effect, Powell has an extra problem, the effect of the presidential elections, whoever the winner will be. The mix between the pandemic recession, politics, and money can lead to unforeseeable consequences, as the history of the Republic of Venice and its Bank show. The understand above all why the ...

vaccino
2020-09-17 Gianmarco Ottaviano

Anti-COVID Vaccine: A Global Public Good

The events of recent weeks, from the start of the first wave of COVID-19 infections in some countries to the arrival of what seems to be a second wave in others, indicate that the world will have a hard time emerging from the current economic crisis linked to the pandemic if a safe and effective vaccine is not discovered first. There is no precedent in human memory of the health and economic sustenance of so many people depending on a single healthcare intervention; and the hopes of so many people being placed in the hands of a professional category, that of scientists, that in recent years has ...

wirecard
2020-07-28 Donato Masciandaro

Finance, Oversight, and Fraud: the case of Wirecard

In the month of June, the Wirecard scandal erupted in Germany. Let's recall the main events. Until that time, Wirecard was mostly known as a success story among companies that use technology to produce banking and financial services. These are firms that some love to call "financial unicorns:" the noun evokes the special nature - whether true or presumed - of the technology used, and the adjective the activity in the sector of banking and finance. But all of the sudden, a statement released by the Central Bank of the Philippines confirmed some important news: Wirecard has a budget hole of almost ...

Recovery fund
2020-07-15 Gianmarco Ottaviano

Recovery Fund: How to Distribute the Resources among Member States?

The Member States of the European Union are currently engaged in difficult negotiations on the Recovery Fund, the fund of 750 billion euros whose purpose is to help European regions recover from the Covid-19 shock. The public debate is dominated by the question of "conditionalities," that is, to what extent the provision of the funds must be conditional upon specific economic policy choices by the beneficiary countries. Although important, this question risks overshadowing another decisive issue, that of the criteria for allocation of the resources among the Member States. Should the EU favor ...

Banche nazionali
2020-06-11 Donato Masciandaro

Bank and Country, the Two Faces of Financial Nationalism

In the months that have just passed, in advanced countries the banks have been the chain of transmission of urgent policy interventions, designed by governments to sustain the aggregate demand for goods and services. Time will tell us what strategy is most effective. Let’s look ahead, though. To do so, like Giano, we will concentrate on what happened in Italy before the pandemic recession began. In at least two cases - that of the European Stability Mechanism (ESM) and that of the Banca Popolare di Bari - the Italian political class has been faced with a question that will certainly arise again ...

Occupazione_covid
2020-05-18 Gianmarco Ottaviano

We Are Not All in the Same Boat

The COVID-19 pandemic is hitting the economies of every country in the world harshly, provoking an unprecedented employment emergency in many of them. An emblematic case, due to the importance of the country and the speed of the effects, is that of the United States. Before the pandemic, the US economy was on a solid track, with an unemployment rate that had reached a historic low of 3.5 percent in February, when China had already stopped. In March, when Europeans began to hole up at home, the US employment rate had risen to a moderate 4.4 percent. Just one month later, the data for April (the ...

Terzo re
2020-03-29 Donato Masciandaro

The Rise of the Third King

In the weeks of the coronavirus, everything that has happened - or not happened - in American economic and monetary policy has immediately reverberated around the world, including through the channel represented by the dollar. It is no coincidence that the first coordinated action between the central banks of the United States, the European Union, the United Kingdom, Japan, Switzerland, and Canada was a dual intervention - the first on the 15th and the second on the 20th of March - aimed at strengthening dollar repo channels between the Fed and other central banks, both in terms of volumes, that ...

FED e BCE
2020-03-16 Donato Masciandaro

Coronavirus and Central Banks: Two False Steps

Modern monetary policy is based on facts and words. In dealing with the emergence of the macroeconomic risk of the coronavirus the Fed has gotten the facts wrong, while the ECB has gotten the words wrong. Let us see why. In general terms, the coronavirus belongs to the macroeconomic family of rare events. As such, its effects on the dynamics of the choices of families, businesses, and financial markets can be both significant and at the same time unpredictable, both in terms of extent and duration. So the coronavirus is a catalyst for uncertainty, that places every central bank in front of a temporal ...

Brexit
2020-03-09 Gianmarco Ottaviano

Post-Brexit Negotiations: It’s Time to be Pragmatic

In the first week of March, the negotiations between the European Union and the United Kingdom began on future relations after Brexit. To begin to understand how things will develop, it’s useful to define the situation, rapidly reviewing the fundamental steps taken recently on both sides of the Channel. Almost four years after the British referendum on Brexit, on January 31, 2020, the United Kingdom left the European Union - and the European Atomic Energy Community (Euratom). The method of withdrawal is governed by the “Withdrawal Agreement,” that regulates the credit and debit relationships ...

Brexit
2020-01-10 Gianmarco Ottaviano

Brexit 2.0: The Chickens Come Home to Roost

Has something really changed for Brexit after Boris Johnson’s triumph in the recent British parliamentary elections? It certainly seems that way, but not for the reasons many people believe, that is, that clarity has finally been reached on the will of the people, who’s in charge in a democracy, and what type of Brexit we can expect. Boris Johnson’s Conservatives won the elections, with an 80-seat majority (their largest majority since 1987) thanks to 43.6 percent of the vote (the highest percentage of any party since 1979). With that majority Johnson will no longer have to duel with a largely ...