Economy & Markets
Edited by Donato Masciandaro and Gianmarco Ottaviano
From Trump to Biden: What Changes for Foreign Trade?
Although the transition is difficult, the world is preparing for a change at the top in the United States, from the Republican president Donald Trump to the Democrat Joe Biden. What can we expect on the international economic relations front once the transition is completed? The question was posed a few days ago by Hillary Clinton, secretary of state with Barack Obama and then the Democratic candidate in the 2016 presidential elections, on the occasion of the opening of the academic year at the European University Institute of Florence. The premise is that before Trump, it was easier for the rest ...
Will There Be a Digital Euro? Yes, and It Will Be Double
Starting in mid-October, the media began to give prominent attention to the first report by the European Central Bank (ECB) dedicated to the possibility of issuing a digital currency, signed by Christine Lagarde and Fabio Panetta, respectively the president of the ECB and a member of the Executive Board. The report presents the various problems that must be faced to define and implement a step that would represent a radical evolution of currency. The approach used by the ECB is to innovate while minimizing risk, a common approach by central bankers. Put differently, the digital euro should solve ...
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 ...
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 ...
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: 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 ...
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 ...
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 ...
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 ...
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 ...