From financial crash to debt crisis

Carmen M Reinhart interviewed by Romesh Vaitilingam, 9 Apr 2010

Carmen Reinhart of the University of Maryland talks to Romesh Vaitilingam about the sequencing of the cycle of debt build-ups – from private debt surges to banking crises to sovereign debt crises – and the four ‘deadly D’s’ that once again threaten many governments as a consequence of the current crisis – deficits, debt, downgrade and default. The interview was recorded at the Royal Economic Society’s annual conference at the University of Surrey in March 2010.

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Related research here and here.

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

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).

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

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

Markus Eberhardt interviewed by Viv Davies, 11 May 2014

The debt-growth link is essential to today's marcoeconomic policy choices. This Vox Talk discusses new evidence based on data on total public debt for 105 economies between 1972 and 2009 and two centuries of data for the UK, US, Sweden and Japan. There is no convincing proof that austerity works and that it is dangerous for policy makers to pretend otherwise.

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

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

Global Crises: Causes, Consequences and Policy Responses

Stijn Claessens interviewed by Viv Davies, 18 Apr 2014

Stijn Claessens talks to Viv Davies about the recent IMF book titled 'Global Crises: Causes, Consequences and Policy Responses', co-edited with M Ayhan Kose, Luc Laeven, and Fabian Valencia. The book provides a comprehensive overview of current research into financial crises and the policy lessons learned. They discuss crisis prevention and management, and the crisis in the Eurozone. The interview was recorded in April 2014.

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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: banking crises, debt, default, financial crises, fiscal deficit, global crisis, recovery

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.

Topics: Financial markets, Macroeconomic policy
Tags: austerity, credit constraints, debt, deleveraging, financial crisis, fiscal consolidation, fiscal policy

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.

Topics: Europe's nations and regions, Macroeconomic policy
Tags: banking union, debt, EMU, euro, eurozone, Eurozone crisis, fiscal consolidation, fiscal policy, imbalances, internal devaluation, Stability and Growth Pact, structural reforms

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).

Topics: Financial markets, International finance
Tags: debt, European sovereign debt crisis, Greece, privatisation, sovereign debt

Greater inequality and household borrowing? New evidence from household data

Olivier Coibion, Yuriy Gorodnichenko, Marianna Kudlyak, John Mondragon, 29 January 2014

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The financial crisis of 2008–09 was preceded by an exceptional rise in borrowing by US households, accounted for primarily by a rise in mortgage debt. There are two main views about the source of this ‘great leveraging’:

Topics: Financial markets, Poverty and income inequality
Tags: credit rationing, debt, Inequality, subprime mortgage crisis, US

Catenarian fiscal discipline

Hans Gersbach, 4 January 2014

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Limiting the accumulation of public debt in democracies has always been a problem, but it has become a particularly pressing one in the last few decades.

Topics: Macroeconomic policy
Tags: debt, democracy, fiscal discipline, fiscal policy, time inconsistency

Public debt and economic growth: There is no ‘tipping point’

Markus Eberhardt, Andrea F Presbitero, 17 November 2013

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The presence of a common threshold, or ‘tipping point’ – beyond which the detrimental impact of debt on growth is significant, or significantly increases – is currently taken as given in many policy circles.

Topics: Macroeconomic policy
Tags: austerity, debt, growth

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