Euro exit: Lessons from Argentina

This is an interesting article by Mario I. Blejer,  Former Governor of the Central Bank of Argentina  and Eduardo Levy-Yeyati Professor of Economics at Barcelona Graduate School of Economics.

Rumours of Eurozone break-up are mounting. This column argues that exiting a strong currency for a weak one poses almost unthinkable challenges, from the redenomination of contracts and the imposition of bank restrictions to the restructuring of external debt and limiting of capital mobility. Lessons from Argentina illustrate just how radical the changes would need to be.

The article is broadly in line with what Eichengreen has said in this paper. Argentina still could manage as pesos were still in the system. With Euro, it is all the more complex.

What are fiscal councils?

Setting up fiscal councils is another of the buzzwords post this crisis. But what are these and which countries have them? What have been the experiences?

Role of economists in Policy-Making – idealistic economist vs cynical economist

Lars Calmfors of Stockholm University has this interesting take on the topic.

The role that research and researchers should play for economic policy-making is an important topic which probably all applied economists have reflected a lot on. It is very difficult to come up with some general theory and to make broad generalisations. It is much easier to try to draw conclusions if one can make explicit references to particular episodes. This is the approach here, where I draw on my personal experiences.

I shall focus on two issues:

1. The roles of value judgements and economic analysis in policy-making and the contribution researchers can make to hold them apart.

2. The possibilities of finding institutional frameworks for the proper integration of economic research in policy making.

Assorted Links

• IFMR Blog points to its new financing product
• Gulzar summaries several issues on  this topic Labor market in the Great Recession
• Cowen asks which country has the largest ramp-up fiscal stimulus? It is Saudi Arabia. Though Saudi is also pretty lowly placed on fiscal transparency.
• Krugman compares Raghu Rajan’s recent article with Schumpeter’s in Great Depression
• Nudges on How McDonald’s uses automatic enrollment
• WSJ Blog points to a new paper from James Bullard of St Louis Fed. He said if US were to slid into Japan style deflation trap, Fed should shift away from interest rate policy and instead focus on “quantitative easing” measures. This would boost inflation expectations if inflation shows signs of ticking lower.
• John Taylor reflects on the new Blinder-Zandi Working Paper on the Crisis.
• Chinn points last decade warmest on record