From financial crash to debt crisis

Carmen M Reinhart interviewed by Romesh Vaitilingam,

Date Published

Fri, 04/09/2010

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See Also

Related research here and here.

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Topics

Financial markets Global crisis Macroeconomic policy
Tags
sovereign debt, banking crises, debt

Related Article(s)

The economic and fiscal consequences of financial crises ‘This time is different’: eight hundred years of financial folly
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March 2010

Where

University of Surrey

Linking banking crises and sovereign defaults in emerging markets

Irina Balteanu, Aitor Erce 12 November 2014

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The feedback loop between fiscal and financial instability has been at the core of the recent turmoil in Europe (Acharya et al. 2014). In some countries, systemic banking crises triggered fiscal distress due to the magnitude of bank rescue operations (for example, in Ireland). In others, substantial sovereign debt tensions, leading to successive sovereign downgrades, severely weakened domestic financial systems (for example, in Greece).

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Topics:  Financial markets International finance Macroeconomic policy

Tags:  twin crises, debt, sovereign debt, sovereign default, banking crises, financial crisis, doom loop, Eurozone crisis, emerging markets

Monetary policy and long-term trends

Charles A.E. Goodhart, Philipp Erfurth 03 November 2014

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Introduction

There has been a long-term downward trend in the share and strength of labour in national income, which is depressing both demand and inflation. This has prompted ever more expansionary monetary policies. While understandable, indeed appropriate, within a short-term business cycle context, this has exacerbated longer-term trends, increasing inequality and financial distortions. Perhaps the most fundamental problem has been over-reliance on debt finance (leverage).

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Topics:  Financial markets Macroeconomic policy Monetary policy

Tags:  monetary policy, Inequality, debt, leverage, wages, labour share, globalisation, consumption, propensity to consume, fiscal policy, Ageing, interest rates, investment, asset prices, housing, house prices, exchange rates, global crisis, mortgages, sub-prime crisis, Macroprudential policy, structural reforms, balance sheets, deleveraging, equity, shared-equity mortgages, Help to Buy

Property debt overhang: The case of Irish SMEs

Fergal McCann, Tara McIndoe-Calder 23 September 2014

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The detrimental impact of credit and property boom-bust cycles on consumption and growth has received much high-profile attention in the aftermath of the Global Crisis (Mian and Sufi 2013, 2014, Dynan et al. 2012). Separately, an empirical literature on non-financial corporates has shown that debt overhang can negatively impact firm investment (Aivazian et al. 2005, Cai and Zhang 2011, Coricelli et al. 2012).

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Topics:  Financial markets

Tags:  debt overhang, debt, Ireland, Small and medium enterprises, capital allocation, credit booms, credit, asset price bubbles, housing bubble, property bubble

Low interest rates and secular stagnation: Is debt a missing link?

Claudio Borio, Piti Disyatat 25 June 2014

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Today, the US government can borrow for ten years at a fixed rate of around 2.5%. Adjusted for expected inflation, this translates into a real borrowing cost of under 0.5%. A year ago, real rates were actually negative. With low interest rates dominating the developed world, many worry that an era of secular stagnation has begun (Summers 2013).

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Topics:  Financial markets Global crisis Monetary policy

Tags:  interest rates, monetary policy, global crisis, debt, secular stagnation, risk-taking channel of monetary policy, natural rate of interest, monetary non-neutrality

Does austerity work? There’s no proof that it does

Markus Eberhardt interviewed by Viv Davies,

Date Published

Sun, 05/11/2014

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See Also

 

Eberhardt,  M. 2013. 'Nonlinearities in the Relationship between Debt and Growth: Evidence from Co-Summability Testing'. CFCM Working Paper 13/06

Eberhardt, M. and Presbitero, A. 2013. 'This Time They're Different: Heterogeneity and Nonlinearity in the Analysis of Debt and Growth'. CFCM Working Paper 13/10

 

 

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Topics

Macroeconomic policy
Tags
debt, GDP growth, austerity, Rogoff-Reinhart debate

Related Article(s)

Debt and growth: No ‘tipping point’ Public debt and economic growth, one more time Rethinking austerity: Introducing a new Vox eCollection Debt and growth revisited
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MP3 Length (Minutes)

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MP3 Length (Seconds)

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When

April 2014

Where

Manchester

Global Crises: Causes, Consequences and Policy Responses

Stijn Claessens interviewed by Viv Davies,

Date Published

Fri, 04/18/2014

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See Also

Stijn Claessens, M Ayhan Kose, Luc Laeven, Fabian Valencia (eds) Global Crises: Causes, Consequences and Policy Responses (IMF, February, 2014) 

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Topics

Macroeconomic policy
Tags
financial crises, banking crises, global crisis, fiscal deficit, debt, default, recovery

Related Article(s)

Derivatives and the Eurozone crisis Understanding contagious bank runs The PADRE plan: Politically Acceptable Debt Restructuring in the Eurozone
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April 2014

Where

London

Fiscal adjustment and growth: Beware of the credit constraints

Emanuele Baldacci, Sanjeev Gupta, Carlos Mulas-Granados 31 March 2014

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In the aftermath of the recent financial crisis, the discussion of the effects of fiscal adjustment on economic growth has intensified. While some scholars have focused on the characteristics of the fiscal consolidation needed to bring public debt down from historically high levels, others have examined the effects of alternative strategies on economic performance. The VoxEU debate aptly covered in “Has Austerity Gone Too Far?” (Corsetti 2012) sums up the conflicting positions.

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Topics:  Financial markets Macroeconomic policy

Tags:  financial crisis, fiscal policy, deleveraging, fiscal consolidation, debt, credit constraints, austerity

Delivering the Eurozone ‘Consistent Trinity’

Marco Buti, Maria Demertzis, João Nogueira Martins 30 March 2014

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As argued in an earlier commentary, the financial crisis exposed important economic inconsistencies in the way that EMU operated.1 Although progress has been made, the reality is that more needs to be done. A number of countries still need to consolidate their public finances further, and also implement structural reforms to promote growth and sustain satisfactory welfare systems. At the same time, there is a need for vulnerable countries to ensure consistency between regaining competitiveness and the sustainability of private and public debts.

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Topics:  Europe's nations and regions Macroeconomic policy

Tags:  eurozone, euro, EMU, imbalances, fiscal policy, structural reforms, fiscal consolidation, debt, Eurozone crisis, Stability and Growth Pact, banking union, internal devaluation

Privatisation and debt: Lessons from Greece’s fiasco

Paolo Manasse 31 January 2014

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In the midst of the European debt crisis, it is tempting to think that high-debt countries could alleviate the recessionary impact of the budget-consolidation process by selling (poorly managed) assets and stakes in their state-owned enterprises (SOEs), and by using the proceeds to buy back their debts (Hope 2011). In addition to providing a cushion for ongoing adjustment programmes and improving solvency, privatisations are deemed to entail long-term efficiency and welfare gains by attracting foreign direct investment and managerial expertise, thus spurring competition and growth.

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Topics:  Financial markets International finance

Tags:  sovereign debt, privatisation, debt, Greece, European sovereign debt crisis

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