Argentina this week formally exited the ninth sovereign debt default in its history. The agreement with creditors took longer than expected, but was settled at reasonable levels, close to original projections, and just in time to avert another blow to the country’s suffering economy. Having reached a deal in the current, uncertain context and with no financial program in hand could be regarded as a success for the government.
The deal reduced Argentina’s debt payments by approximately 27% and — even more crucially...
When you throw a tennis ball to the ground, it bounces back up. But if you throw a wine glass, it shatters. Many countries’ economies are in free fall. Will they bounce back or shatter? What can be done to assure a strong recovery?
The economic consequences of the COVID-19 pandemic may not be obvious, as ongoing research with Sebastián Bustos on previous crises suggests. In the 2008 global financial crisis, among the least affected countries...
Countries all over the world are fighting COVID-19 by reducing social and economic interactions, measures that have proven effective in parts of the world but are extremely costly. We are in the midst of the deepest recession since the great depression, and World GDP is expected to fall by 4.9% in 2020, with two-digit declines in many countries (IMF 2020). A series of excellent papers suggest that the huge costs in terms of livelihoods are justified by the gains in terms of lives saved from the pandemic (e.g. Acemoglu et...
Before COVID-19, spending on business travel totaled $1.5 trillion a year (about 1.7% of world GDP). Now it is down to a trickle, as countries have closed their borders and social distancing has taken hold. Planes have been grounded, hotels are closed, and executives are not earning frequent flier miles. Many travel and hospitality jobs are feeling the consequences. But if this were all there was to it, the impact, however large, would probably be much smaller than the decline in general international tourism, and easily...
Certainty is like a rainbow: wonderful but relatively rare. More often than not, we know that we don’t know. We may seek to remedy this by talking to people who may know what we want to know. But how do we know that they know? If we cannot ascertain whether they actually do know, we must trust them.
Historically, we have bestowed our trust on the basis of science, experience, or divine inspiration. But what if the knowledge we seek does not yet exist, and even science knows that it does not know what is being...
Time is at a premium in a pandemic. China’s slow response to the coronavirus in December and January cost the world dearly. So did the slow response in Europe and the US in February and March. But the world may not have learnt the lesson: the mistake appears to be happening once again, this time at the IMF. By historical standards, the IMF has responded quickly and massively. In early April, it announced during its spring meetings that a major economic downturn was coming. It hurriedly revamped its rapid financing...
Suppose you knew that a hurricane was coming, but meteorologists were uncertain if it would make landfall as a Category 2 or a Category 5 storm. Which scenario should you prepare for?
The problem you face reflects the costs of assuming that it is a Category 5 when it is only a Category 2 and vice versa. The latter scenario implies deaths and destruction that could have been avoided through evacuations, well-supplied shelters, and precautionary shutdowns. The first scenario implies unnecessary preventive costs. In the...
Opening up the economy means allowing more human interaction and hence greater potential for new #COVID19 infections. Two numbers matter for deciding whether this can be done safely any time soon.
While we are all watching the news about the explosion of COVID-19 cases in the United States, Spain and Italy, we will soon face a bigger problem.
After talking with almost a dozen experts from some of the world’s leading universities, I’m much more worried about what might soon happen in Africa, Latin America and the Caribbean than about the latest U.S. or European pandemic statistics.
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Harvard University professor Ricardo Hausmann, an expert in global development issues, told me that the United...
At a moment when advanced economies are debating whether to fund ambitious fiscal packages with zero-interest rate Treasury debt or central bank (“helicopter”) money, we in Latin America feel like the heroes in John Ford´s classic 1930s Western film Stagecoach: Surrounded by enemies, and with precious few fiscal bullets to spare.
Indeed, emerging economies have suffered the double shock of a flight-to-quality increase in financial costs and a commodity price decline that narrows the room for fiscal policy to respond...
COVID-19 is ravaging advanced economies such as Italy, France, Spain, and the United States. Beyond the deaths and human suffering, markets are discounting a catastrophic recession accompanied by massive defaults, as expressed in the radical repricing of corporate credit risk by financial markets.
Trump says it would destroy us. Sanders says it will save us. The majority of millennials would like it to replace capitalism. But what is “it”? We bring in the economists to sort things out and tell us what the U.S. can learn from the good (and bad) experiences of other (supposedly) socialist countries.
The European Union's ambitious new Green Deal promises to make the bloc carbon-neutral by 2050, while creating new jobs and raising living standards. But, given that Europe accounts for only 10% of global carbon emissions, the true test of its green agenda lies in its willingness to help others with their own sustainable development.
Eric Protzer, Paul Summerville - letter to Financial Times
Benedict Mander’s report “Chile’s inequality ignites unrest” (October 22) effectively articulates some of the frustrations behind the protests in Santiago: growth that is not inclusive, and a sense of being left behind. But like so much commentary on contemporary political unrest, it then makes the leap of assuming this anger can be chalked up simply to inequality of income and wealth.
This is a common mistake. In fact, behavioural science shows that people do not systematically dislike unequal...
he People’s Party of Canada (PPC), a cousin of the populist movements springing up in many advanced democracies, got badly trounced in the recent federal election. Maxime Bernier, the self-styled populist leader and founder of the PPC, even lost his seat in Beauce, Quebec, in the process. The PPC polled less than 2 percent of the popular vote, finished sixth among national political parties, and is now expected to close shop.
The PPC’s stark failure stands in contrast to populist success in other Western...
