Giovanni B. Pittaluga

Credit Supply and the Rise in Sovereign Debt Risk in the Eurozone

Since the financial crisis of 2007–2008, much has been written about the consequences of the fragility of the banking systems of several countries, as that fragility affects these countries’ deficit and debt and the resulting crisis. The need to save the banking system from a severe insolvency crisis has prompted the governments of many countries to support their economies by implementing expansionary fiscal policies, with the state taking on the losses of banks in difficulty. In many cases this has resulted in a significant increase in public deficits and debts.

Indipendenza delle banche centrali e coordinamento tra politica monetaria e politica fiscale

In a mode1 a la Rogoff, with independent fiscal (AF) and monetary (AM) authority, the Nash equilibrium is characterized by an infiation rate and by a fiscal surplus lower than the ones desired by the two authorities. In the contract of performance approach, the coordination problem between monetary and fiscal policy is solved bringing back the AM preferences to those of the AF. In this way, monetary policy is not safeguarded by politica1 pressures. If one accepts the political business cycle approach, the relations between AF and AM are brought back to a multi-period context, rather than a one period context as in Rogoff and in the contract of performance approach. In this perspective, AM and AF, although both independent, can give rise to repeated games and to forms of coordination, spontaneous or «forced». The latter can be realized in institutional moments of negotiation between AM and AF or in normative constraints to the behaviour of AM and AF.

Why Did Japan Delay the Adoption of the Gold Standard

There is now a considerable literature that argues that an external threat weakens autocracies and advances the process of democratization. This paper shows that in the face of an external threat an autocratic regime can become even stronger domestically by using foreign debt and thus increasing its capacity for repression without significantly increasing redistributive inequality. However, borrowing in foreign currencies exposes autocracies to the risk of sudden stops and default. Hence their caution in resorting to foreign debt. Behaviour of this type was at the origin of Japans late adoption of the gold standard, even though the Meiji regime was aware that membership was essential for the economic and military strengthening of the country.

An Index of Bank Liquidity Creation: An Application to the Banking Systems of the Eurozone and the Liquidity Policy of the ECB during the Euro Crisis

The main function of banks is maturity transformation. By performing this function banks create liquidity. They lend illiquid loans to borrowers of funds, and in the face of these they emit liabilities which may be withdrawn at any time at par value (Bryant, 1980; Diamond and Dybvig, 1983; Holmstrom and Tirole, 1998).

Gross Imbalances, Liquidity Shortage and the Role of the Federal Reserve

There has been much debate about the link between global imbalances and the financial crisis of 2007–2008. The most recent contributions show that the recent global financial crisis was preceded not so much by a widening of current account imbalances as by a pronounced increase in gross capital flows between countries. In particular, between 2002 and 2007 several banks from major European countries dramatically increased their long-term assets in dollars, in particular as asset-backed securities (ABS), by stocking up on short-term funding on the interbank market or the money market.

Diversification, Diversity and Systemic Risk in European Banking

The recent financial crisis has revealed the unexpected fragility of financial systems in the industrialized countries. The process of national deregulation that started in the 1980s led to an intense process of consolidation of financial institutions. Consequently, both in the United States and in Europe, the degree of concentration in banking systems increased significantly.

Can Financial Supervision Enhance the Central Bank’s Independence?

The financial crisis of 2008 demands an urgent review of financial regulation supervision. It is widely believed that sharing supervision amongst various agencies is in part the cause of the recent crisis.