Some thoughts on the interactions between public debt, public investments and productivity growth in the euro area. Key risk is that the union ends up being split between a fiscally sound/high growth block and a fiscally stagnant one. www.ecb.europa.eu/pub/pdf/sint...

Is the EU heading towards a financial resource curse? Cheap imports (and capital flows) from China could crowd out economic activity in tradable industries in the EU, causing a productivity growth slowdown. crei.cat/wp-content/u...

Deeply honored to have participated in a panel at the @ecb.europa.eu Forum in Sintra. My remarks focused on the risk that high legacy debt may push part of the euro area into fiscal stagnation, and how a pro-growth approach to fiscal policy can mitigate this risk.

This Macro-Musings episode 🔈 podcasts.apple.com/it/podcast/m... featuring @lucafornaro.bsky.social provides extremely insightful and clear views on macroeconomic policies to counter hysteresis and stagnation 📈

Enjoyed very much this podcast with MacroMusings and @lucafornaro.bsky.social about endogenous growth and aggregate demand policies. youtu.be/B7aRTPgepok?...

What do powerlifting and economic hysteresis have in common? My latest newsletter explores this connection, building on @petercontibrown.bsky.social Conti-Brown's powerlifting journey and @lucafornaro.bsky.social's hysteresis research. macroeconomicpolicynexus.substack.com/p/let-it-fai...

New column by @lucafornaro.bsky.social and Martin Wolf cepr.org/voxeu/column...

@lucafornaro.bsky.social & Martin Wolf argue that a feedback loop is possible between fiscal policy and #growth. Exiting fiscal stagnation requires large policy interventions that reduce public debt-to-GDP ratio, such as credible pro-growth strategies. cepr.org/voxeu/column... #EconSky

Buon 25 aprile!

New paper with Martin Wolf on Fiscal Stagnation. Key insights: 1) High public debt may push the economy into fiscal stagnation, a persistent state of low growth and high fiscal distortions. 2) Pro-growth policies are crucial to exit stagnation, but they require credibility.

I like that Brunnermeier and Merkel at least nod (without citation for some reason) at @gianlucabenigno.bsky.social and @lucafornaro.bsky.social ‘s work on the Financial Resource Curse (e.g crei.cat/wp-content/u...) 3/n

In an AER paper w Martin Wolf (of U.St.Gallen) @gianlucabenigno.bsky.social and @lucafornaro.bsky.social show that the Financial Resource Curse has even larger negative implications when flows go to the world technological leader, I.e. the US (ungated here: www.newyorkfed.org/research/sta...) 3/n

Too many recent takes on this issue ignore the downsides of Treasuries’ global safe haven status. 2/n

Finally, in my own paper with @gianlucabenigno.bsky.social and @lucafornaro.bsky.social, we show that the Financial Resource Curse is not merely a theoretical possibility by presenting careful empirical evidence that it is a general phenomenon www.sciencedirect.com/science/arti... 4/n

Very clear and comprehensive piece by Brunnermeier and Merkel on the pros and cons (for the US) of US Treasuries being a global safe asset. 1/n

This is very cool

Olivier Blanchard argues that we should understand better the macroeconomics of the medium run, and I could not agree more. Since I have been working on this for a while, let me show you why this is a promising field for young researchers!

@lucafornaro.bsky.social argues that political constraint is a reflection of financial constraint, @michaelpettis.bsky.social that political constraint is a function of choices made by other political actors. It is not that international capital flows always restrict the domestic policy space...

Very interesting thoughts, as usual, from @michaelpettis.bsky.social. But is it true that openness to international capital flows always restrict the domestic policy space? Capital inflows typically reduce the government's borrowing cost, which should increase the policy space.

All of this points to downside growth risks. It's not necessarily a recession I'm worried about (although I am). Lower growth expectations reduces the incentive to invest in productivity-improving technology (see Benigno and Fornaro's work on Keynesian growth models) bsky.app/profile/pear...

This line of thought, in addition to having zero merit on the substance, objectively advances Putin's agenda of turning European people against the European Union.

Interesting thoughts, make me think of this great book by Thomas Philippon www.hup.harvard.edu/books/978067...

There's a very interesting debate on the macroeconomic consequences of international capital flows going on between @pkrugman.bsky.social and Klein/ @michaelpettis.bsky.social open.substack.com/pub/matthewc... open.substack.com/pub/matthewc...

Fernando Broner, Alberto Martin and I are organizing a workshop on international macro on 12 and 13 June in Barcelona. It should be pretty fun. Deadline to submit a paper is 28 February. More infos here events.bse.eu/live/files/5...

Wondering how many more #econvinyljunkies are out there

One important implication of this thread is that there is a possibility of a return to the low-interest rate world that existed prior to the pandemic.

Interesting. Capital inflows — it matters what they actually invest in. Do they grow productive capacity or just run up asset prices? Of course, this depends on receiving country policies and not just the investors

Interesting note by Krugman. But is it true that fast growing economies typically attract capital inflows and run trade deficits? A 🧵 on a recent literature challenging this notion, and on why China's trade surpluses could be a problem for global productivity growth.

In economics, editors, referees, and authors often behave as if a published paper should reflect some kind of authoritative consensus. As a result, valuable debate happens in secret, and the resulting paper is an opaque compromise with anonymous co-authors called referees. 1/

Incredibly happy to see Prof Fornaro on BlueSky sharing these threads. Always learn a huge amount from them and he’s clearly on the frontier of macro.

What would Europe’s productivity look like without the hysteresis effects associated to frequent and persistent economic crises since 2008?

Un thread molto interessante sull'argomento è stato scritto da @lucafornaro.bsky.social, un giovane economista molto bravo, che consiglio di seguire a chi è interessato a questi temi END bsky.app/profile/luca...

That's a good point, I am actually working on a paper related to that. To me, Europe doesn't necessarily need a broadbased fiscal stimulus. But in many EU countries public investment is very low, and increasing it could help to revive growth. And higher growth would help on the debt side.

Great thread. Biden made many mistakes, but running the US economy hot was a huge win. Comparison w both Europe and Obama-era US show why

Last Sunday Mario Draghi delivered a forceful speech, arguing that Europe has fallen into a vicious cycle of weak domestic demand, insufficient macroeconomic stimulus, depressed investment and low productivity growth cepr.org/system/files.... Here's a 🧵 on recent research related to this view.

Interesting thoughts from @martinsandbu.bsky.social. In fact, one could also argue that fostering investments in certain sectors may contribute to price stability. This may be the case for investments in clean technologies during the green transition cepr.org/voxeu/column...

@skandaamarnath.bsky.social on the importance of policies that encourage green investments to fight climate change. In fact, these policies can be useful also from a macroeconomic perspective, especially to contain the inflationary pressures arising from the green transition cepr.org/voxeu/column...

Deeply honored to receive an ERC Consolidator grant! The MACROGROWTH project will shed light on how monetary and fiscal policies should be designed to ensure that new, and potentially disruptive, technologies deliver higher productivity and widespread welfare gains. #econsky

Two interesting charts from @josephpolitano.bsky.social, calling for two questions. Is high US productivity growth the result of running the economy hot? Did tradable services (temporarily?) replace manufacturing as the engine of growth?

"coordination between monetary, fiscal, and credit policies may be the key to a smooth transition, reconciling the greening of our economies with high economic activity and low inflation. Fiscal subsidies and targeted credit policies supporting green investments may play a crucial role."

A Green Dilemma for Monetary Policy cepr.org/voxeu/column.... Green transition is akin to a negative supply shock. Central banks can look through, at the risk of disanchoring inflation expectations, or tighten, causing potentially permanent output losses. Green subsidies can help. #econsky

I have compiled a very imperfect preliminary list of monetary/macro people I’ve found so far on this site. If you are active in the field, feel free to DM and I’ll add you! go.bsky.app/DS8T3ug

www.bis.org/events/green... on the interlinkages between decarbonisation, inflation, output & monetary policy needs to be at the top of #ECB officials' reading list. Monetary policy has a vital role to play in facilitating (and avoiding hindering) green transition! H/T @stanjourdan.bsky.social 3

I put together a starter pack of all the academic macroeconomists I could find on the platform. It's short. Please message me if you would like to be added. go.bsky.app/RYnjd8k #econsky etc.

A 🧵 on the pros and cons of reducing the trade deficit: a productivity perspective, based on old and new academic research. Bottomline: unregulated trade deficits may hurt productivity, but reducing the deficits is not the best way to fix this. #econsky

Interesting thoughts from Martin Sandbu on the role of the economy in US elections

Great summary, thanks!

How will the green transition affect monetary policy, and vice-versa? Veronica Guerrieri, Lucrezia Reichlin and I just released a report tackling these questions with novel empirical evidence and a new theoretical framework. Here's a summary.

New paper on Fragmented Monetary Unions. We provide a theory to understand why fragmentation risk threatens price stability in the euro area, some monetary interventions by the ECB (OMT, PEPP, TPI), and why the ECB is not your usual central bank. Comments are welcome! crei.cat/wp-content/u...

Interesting insight: do supply shocks trigger a trade off between scarring effects (www.sciencedirect.com/science/arti...) and inflation getting entrenched?