Willem Buiter (Citi) speaks at the ESM

"Global Economics View"

 
In this session, we analyze the likely future capacity of seven advanced economies (US, Japan, UK, EA, Germany, France, and Italy) to engage in expansionary monetary and fiscal policy during the next recession.

All seven are virtually certain to hit the effective lower bound (ELB) during the next recession with the US likely to have the most room for cuts in the policy rates. This is a serious matter as there is little evidence of a significant transmission of quantitative easing and qualitative easing to the real economy when financial markets are orderly.

Fiscal policy space is smallest in the US, which ought to be engaged in fiscal tightening rather than in the procyclical fiscal stimulus currently in the pipeline.

The most effective countercyclical fiscal stimulus would be a monetized increase in the deficit due to tax cuts or increases in public spending. Such helicopter money drops are technically easy but institutionally difficult in all seven economies except the UK.

It is desirable to restore the effectiveness of conventional monetary policy by eliminating the ELB. There are several ways of doing this, but the preferred one is the elimination of currency notes (cash). There are no technical obstacles to the elimination of cash.
 
Willem Buiter joined Citi in January 2010 as Global Chief Economist. Before joining Citi, Willem was Professor of Political Economy at the London School of Economics and Adviser to Goldman Sachs from 2005 to 2010. He was Chief Economist for the European Bank for Reconstruction & Development from 2000 to 2005 and a founder External Member of the Monetary Policy Committee of the Bank of England from 1997 to 2000. He has been a Consultant to the IMF, the World Bank, the Inter-American Development Bank, the Asian Development Bank and the European Commission, and has been an Adviser to many central banks and finance ministries. Willem has published on economic affairs in books, professional journals and the press, and has held academic positions at Princeton University (1975-76 and 1977-79), Bristol University (1980-82), the London School of Economics and Political Science (1976-77 and 1982-85), Yale University (1985-1994) and Cambridge University (1994-2000). Willem holds a BA in economics from Cambridge University and a PhD in economics from Yale University. He has been a member of the British Academy since 1998 and was awarded the CBE for services to economics in 2000.

This is an ESM research internal seminar. If you would like to attend, please write an email to ESMresearch@esm.europa.eu