Seminar with Lorenzo Codogno and Paul van den Noord. He will present his recent research paper in collaboration with Paul van den Noord. They will explain their findings that rebalancing the policy mix away from monetary towards fiscal stimulus in the Eurozone can best be achieved at the supranational level by introducing a Eurobond together with fiscal capacity.
For their reserach they extended their previous model (Codogno and Van den Noord 2019) to include financial risk-premium shocks by explicitly modelling bond yields, bank lending and public debt dynamics in a stylised Eurozone formed by a ‘core’ country and a ‘periphery’ country.
They also replaced national bonds with Eurobonds in banks’ and ECB’s balance sheets, and introduced fiscal capacity with the power to adjust the aggregate fiscal stance and a new easing scheme mandating the ECB to adjust its portfolio of Eurobonds as needed in the pursuit of price stability.
They conclude their research paper that had a Eurobond/fiscal capacity existed at the onset of the Great Financial Crisis, the recession would have been much more muted.
Lorenzo Codogno is the founder and chief economist of his consulting vehicle, Lorenzo Codogno Macro Advisors Ltd, and Senior Fellow of the LUISS School of European Political Economy in Rome, on top of his LSE position. Prior to joining LSE, Lorenzo Codogno was chief economist and director general at the Treasury Department of the Italian Ministry of Economy and Finance (May 2006-February 2015).
Codogno's main research interests include European integration and economic governance, especially related to economic reforms, the Europe 2020 strategy, the European semester and the fiscal framework.