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Beatrice Weder di Mauro

Bio: Beatrice Weder di Mauro is an academic researcher from Graduate Institute of International and Development Studies. The author has contributed to research in topics: Government & Financial crisis. The author has an hindex of 12, co-authored 43 publications receiving 935 citations. Previous affiliations of Beatrice Weder di Mauro include Center for Economic and Policy Research.

Papers
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Book
01 Jan 2020
TL;DR: In this paper, the authors address some key questions: How, and how far and fast, will the economic damage spread? How bad will it get? How long will the damage last? What are the mechanisms of economic contagion? And, above all, what can governments do about it.
Abstract: "COVID-19 may be as contagious economically as it is medically. This eBook addresses some key questions: How, and how far and fast, will the economic damage spread? How bad will it get? How long will the damage last? What are the mechanisms of economic contagion? And, above all, what can governments do about it?"

401 citations

Book
01 Jan 2020
TL;DR: The case for decisive and coordinated fiscal stimulus is overwhelming as mentioned in this paper, leading economists from around the world are calling for swift policy action to mitigate the economic damage from the global pandemic.
Abstract: "Leading economists from around the world are calling for swift policy action to mitigate the economic damage from the global pandemic. In this second eBook on the coronavirus from CEPR and Vox, the experts are unanimous that the case for decisive and coordinated fiscal stimulus is overwhelming."

275 citations

01 Nov 2010
TL;DR: In this article, the impact of the economic crisis on the countries of central and eastern Europe (CESEE) and draws out the main policy lessons, focusing on behavioural adjustments occurring within the countries within the region in the wake of the crisis and on changes in the external environment.
Abstract: This report examines the impact of the economic crisis on the countries of central and eastern Europe (CESEE) and draws out the main policy lessons. Until the crisis hit, CESEE countries had been pursuing a distinctive model of growth and catch-up through integration with the European Union, although not all countries had achieved the same level of integration with the EU. The crisis was a major challenge for the policies pursued in many CESEE countries, and the region was hit by the crisis much harder than other parts of the emerging world, and is also recovering more slowly. In chapter 1, we compare the pre-crisis development model of the central, eastern and south-eastern Europe (CESEE) region with similar countries in Asia and Latin America and study the impact of the crisis. We highlight that the CESEE growth model was fundamentally different from models in other emerging country regions, but also that it had two variants. The first, which characterised most central European countries, was by and large appropriate and sustainable. But there is a second group of CESEE countries (we call it the Baltic-Balkan group) in which the same overall growth model led to widespread misallocation of resources and unsustainable growth trajectories. These countries are undergoing a much more painful recovery from the crisis. In chapter 2 we scrutinise more closely the growth model of the region. We study the short-run challenges and the medium- to longer-run issues, focusing on behavioural adjustments occurring within the countries of the region in the wake of the crisis and on changes in the external environment. We discuss policy issues to make the re-oriented growth model sustainable and successful. Chapters 3, 4 and 5 examine three key policy areas: exchange-rate policy, financial stability and fiscal sustainability. We identify a strong role for exchange-rate policy both in the unsustainable pre-crisis developments of a number of countries and in their dramatic response to the crisis. However, concerning the other two main policy areas, it is true more generally that even more conservative domestic financial regulation and supervision and fiscal policy could not have crisis-proofed those CESEE countries which, even before the crisis, had double-digit current-account deficits. Looking forward, improving supply side conditions and competitiveness will be a key challenge for most countries in the region. Massive cross-border holdings in CESEE banks pose significant challenges to financial regulation and we highlight a large number of unresolved issues, while for fiscal sustainability we are cautiously optimistic, but certainly more optimistic than most analysts who call for overly strict, and hence pro-cyclical, fiscal policy. In our concluding chapter 6, we raise policy issues for the CESEE countries and the EU. The general conclusion is that the benefits of EU integration for countries that are catching up are conditional on the quality of national policies and of the EU framework itself. In both respects we point out past failings and suggest strategic improvements. Reorienting the growth model in those countries that entered a shunt-line before the crisis will be hard because of their legacies, but that there is no other path to follow in order to make the EU’s eastern enlargement a lasting economic success story.

95 citations

Posted Content
TL;DR: In this paper, the authors investigate the market reactions of stock prices and credit default swap (CDS) spreads of European banks in order to gauge the extent to which it is expected that bail-in will indeed become the new regime.
Abstract: The declared intention of policy makers is that future bank restructuring should be conducted through bail-in rather than bail-out. Over the past years there have been a few cases of European banks being restructured where creditors were bailed in. This paper exploits these cases to investigate the market reactions of stock prices and credit default swap (CDS) spreads of European banks in order to gauge the extent to which it is expected that bail-in will indeed become the new regime. We find evidence of increased CDS spreads and falling stock prices most notably after the bail-in in Cyprus. However, bail-in expectations appear to depend on the sovereign's fiscal strength, i.e., reactions are stronger for banks in countries with limited fiscal space for bail-out. Moreover, actual bail-ins lead to stronger market reactions than the legal implementation of bank resolution regimes, supporting the saying that actions speak louder than words.

56 citations


Cited by
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Journal ArticleDOI
TL;DR: In this article, the authors calibrate disaster probabilities from the twentieth century global history, especially the sharp contractions associated with World War I, the Great Depression, and World War II.
Abstract: The potential for rare economic disasters explains a lot of asset-pricing puzzles. I calibrate disaster probabilities from the twentieth century global history, especially the sharp contractions associated with World War I, the Great Depression, and World War II. The puzzles that can be explained include the high equity premium, low risk-free rate, and volatile stock returns. Another mystery that may be resolved is why expected real interest rates were low in the United States during major wars, such as World War II. The model, an extension of work by Rietz, maintains the tractable framework of a representative agent, timeadditive and isoelastic preferences, and complete markets. The results hold with i.i.d. shocks to productivity growth in a Lucas-tree type economy and also with the inclusion of capital formation. The Mehra-Prescott [1985] article on the equity risk-premium puzzle has received a great deal of attention. An article published three years later by Rietz [1988] purported to solve the puzzle by bringing in low-probability economic disasters, such as the Great Depression. I think that Rietz’s basic reasoning is correct, but the profession seems to think differently, as gauged by the continued attempts to find more and more complicated ways to resolve the equity-premium puzzle. I think the major reason for skepticism about Rietz’s argument is the belief that it depends on counterfactually high probabilities and sizes of economic disasters. Thus, a key aspect of my empirical analysis is the measurement of the frequency and sizes of the international economic disasters that occurred during the twentieth century. The three principal events are World War I, the Great Depression, and World War II, but post-World War II depressions have also been significant outside of OECD countries. My analysis of these events suggests a disaster probability of 1.5–2 percent per year with a distribution of declines in per capita GDP ranging between 15 percent and 64 percent. I construct a model of the equity premium that extends Lucas

1,911 citations

Journal ArticleDOI
TL;DR: For example, the authors found that government restrictions on commercial activity and voluntary social distancing, operating with powerful effects in a service-oriented economy, are the main reasons the U S stock market reacted so much more forcefully to COVID-19 than to previous pandemics in 1918, 1957, and 1968.
Abstract: No previous infectious disease outbreak, including the Spanish Flu, has affected the stock market as forcefully as the COVID-19 pandemic In fact, previous pandemics left only mild traces on the U S stock market We use text-based methods to develop these points with respect to large daily stock market moves back to 1900 and with respect to overall stock market volatility back to 1985 We also evaluate potential explanations for the unprecedented stock market reaction to the COVID-19 pandemic The evidence we amass suggests that government restrictions on commercial activity and voluntary social distancing, operating with powerful effects in a service-oriented economy, are the main reasons the U S stock market reacted so much more forcefully to COVID-19 than to previous pandemics in 1918–1919, 1957–1958, and 1968

927 citations

ReportDOI
TL;DR: In this article, the authors present a theory of Keynesian supply shocks: supply shocks that trigger changes in aggregate demand larger than the shocks themselves, and argue that the economic shocks associated to the COVID-19 epidemic may have this feature.
Abstract: We present a theory of Keynesian supply shocks: supply shocks that trigger changes in aggregate demand larger than the shocks themselves. We argue that the economic shocks associated to the COVID-19 epidemic—shutdowns, layoffs, and firm exits—may have this feature. In one-sector economies supply shocks are never Keynesian. We show that this is a general result that extend to economies with incomplete markets and liquidity constrained consumers. In economies with multiple sectors Keynesian supply shocks are possible, under some conditions. A 50% shock that hits all sectors is not the same as a 100% shock that hits half the economy. Incomplete markets make the conditions for Keynesian supply shocks more likely to be met. Firm exit and job destruction can amplify the initial effect, aggravating the recession. We discuss the effects of various policies. Standard fiscal stimulus can be less effective than usual because the fact that some sectors are shut down mutes the Keynesian multiplier feedback. Monetary policy, as long as it is unimpeded by the zero lower bound, can have magnified effects, by preventing firm exits. Turning to optimal policy, closing down contact-intensive sectors and providing full insurance payments to affected workers can achieve the first-best allocation, despite the lower per-dollar potency of fiscal policy.

675 citations

Journal ArticleDOI
TL;DR: In this article, market reactions to the 2019 novel coronavirus disease (COVID-19) provide new insights into how real shocks and financial policies drive firm value, and the results illustrate how anticipated real effects from the health crisis, a rare disaster, were amplified through financial channels.
Abstract: Market reactions to the 2019 novel coronavirus disease (COVID-19) provide new insights into how real shocks and financial policies drive firm value. Initially, internationally oriented firms, especially those more exposed to trade with China, underperformed. As the virus spread to Europe and the United States, corporate debt and cash holdings emerged as important value drivers, relevant even after the Fed intervened in the bond market. The content and tone of conference calls mirror this development over time. Overall, the results illustrate how anticipated real effects from the health crisis, a rare disaster, were amplified through financial channels.

634 citations

Journal ArticleDOI
TL;DR: The authors survey the recent literature on sovereign debt and relate it to the evolu- tion of the legal principles underlying the sovereign debt market and the experience of the most recent debt crises and defaults.
Abstract: This paper surveys the recent literature on sovereign debt and relates it to the evolu- tion of the legal principles underlying the sovereign debt market and the experience of the most recent debt crises and defaults. It finds limited support for theories that explain the feasibility of sovereign debt based on either external sanctions or exclu- sion from the international capital market and more support for explanations that emphasize domestic costs of default. The paper concludes that there remains a case for establishing institutions that reduce the cost of default but the design of such institutions is not a trivial task.

525 citations