Patrick Bolton, Mitu Gulati, Ugo Panizza, 13 October 2020

The Covid-induced economic harm may soon result in multiple sovereign debtors moving into default territory – a situation that the global financial architecture is not built to tackle. This column makes the case for ex post state intervention in debt contracts to provide temporary legal protection to debtor countries while they divert resources to deal with the Covid-19 crisis. It shows that in the case of Greece, when such intervention was necessary, there were no negative spillovers on periphery euro area debt markets associated with the Greek ex post modification of contract terms.

Barry Eichengreen, Poonam Gupta, 13 May 2016

The recent reversal of capital flows to emerging markets has pointed to the continuing relevance of the sudden stop problem.  This column analyses the sudden stops in capital flows to emerging markets since 1991. It shows that the frequency and duration of sudden stops have remained largely unchanged, but that global factors have become more important in their incidence.  Stronger macroeconomic and financial frameworks have allowed policymakers to respond more flexibly, but these more flexible responses have not guaranteed insulation or significantly mitigated the impact.

Olivier Blanchard, 03 October 2014

Before the 2008 crisis, the mainstream worldview among US macroeconomists was that economic fluctuations were regular and essentially self-correcting. In this column, IMF chief economist Olivier Blanchard explains how this benign view of fluctuations took hold in the profession, and what lessons have been learned since the crisis. He argues that macroeconomic policy should aim to keep the economy away from ‘dark corners’, where it can malfunction badly.

Sebnem Kalemli-Ozcan, 07 January 2014

Financial crises are generally preceded by credit booms and a build-up of external debts. Although it is unclear whether Turkey is experiencing a financial bubble, as of 2013, 58% of the corporate sector’s debt was denominated in foreign currencies. This column argues that this explains the Central Bank of Turkey’s interventions to prop up the value of the Turkish lira. Given the relatively low level of reserves and the unfolding corruption scandal, it is a critical question how long the Bank can continue to do so.

Olivier Accominotti, Barry Eichengreen, 14 September 2013

From 2001 to 2008, half of Europe received capital inflows from the other half and beyond. In 2009, that stopped, capital accounts switched signs and a crisis occurred. This column draws parallels from a similar episode in Europe just before the Great Depression. It highlights that in both episodes global factors – largely exogenous to conditions in the borrowing countries – shaped the capital flows and reversals.

Eduardo Cavallo, Andrew Powell, 30 August 2013

As emerging markets slow, the fear of ‘sudden stops’ in capital flows is rising. This column presents a new taxonomy of Sudden Stops that is founded on the behaviour of gross and net capital flows. The results raise several puzzles. Given continued financial globalisation, how developing and advanced economies can protect themselves at minimum cost remains a critical topic for researchers and policymakers.

Jean Pisani-Ferry, Silvia Merler, 02 April 2012

Many analysts and observers have put forward that the euro crisis is a balance-of-payments crisis at least as much as a fiscal crisis. This column provides evidence of capital-flow reversals in Greece, Ireland, Portugal, Spain, and Italy. It argues that the fostering of a pan-European banking industry and the creation of a banking union with centralised supervision and access to resources to recapitalise weak financial institutions should feature high on the policy agenda.

Guillermo Calvo, 06 April 2009

The G20 communiqué revealed a clear attitude towards chain-reaction crises. Here one of the world’s most experienced and insightful crisis-watchers argues the G20 communiqué reflects a major improvement in the way leaders view financial crises – moving away from the view that blames the victims and towards a view that recognizes systemic crises and chain-reaction accidents involving many innocent bystanders.

Guillermo Calvo, 23 March 2009

Fiscal stimulus and financial regulation cannot restore credit availability. This column argues that we need a global lender of last resort to restore liquidity. In the short run, it presses for large liquidity facilities to protect emerging market economies from the risk of damaging sudden stops of capital inflows.


CEPR Policy Research