Pandemic recession and helicopter money: Venice, 1629–1631

We analyse the money-financed fiscal stimulus implemented in Venice during the famine and plague of 1629–31, which was equivalent to a ‘net-worth helicopter money’ strategy – a monetary expansion generating losses to the issuer. We argue that the strategy aimed at reconciling the need to subsidize inhabitants suffering from containment policies with the desire to prevent an increase in long-term government debt, but it generated much monetary instability and had to be quickly reversed. This episode highlights the redistributive implications of the design of macroeconomic policies and the role of political economy factors in determining such designs.

Testing the absorber hypothesis of exchange rates for the overshooting of agricultural prices in China

This study aims to test the overshooting effect of agricultural prices and the absorber hypothesis of exchange rates by extending the existing overshooting model. Using a combination of modern time series methods and monthly aggregate data from China, we demonstrate that overshooting of agricultural prices does indeed occur since the impact of monetary expansion on flexible agricultural prices is significantly larger than on relatively sticky industrial prices. Granger causality tests confirm that monetary expansion is a possible determinant of the movements of both agricultural and industrial prices, thus providing a solid empirical foundation for the overshooting hypothesis. Our findings also confirm the absorber hypothesis, in that the overshooting effect of agricultural prices under a fixed exchange rate regime (ERR) is shown to be greater than that under a floating ERR. The main policy implication is that policymakers should pay attention to the spillover effect of monetary expansion on agricultural prices when adjusting macroeconomic policies, especially under a fixed ERR.

Expected Inflation Phenomena on Inflation and Unemployment Tradeoff - Evidence from Indonesia

This study is about Indonesian Phillips curve from 1990 to 2019 using a VAR model. I found inflation and unemployment tradeoff, but expected inflation is negative. Negative expected inflation will face difficulties to BI in managing interest rate stemmed from economic shocks. Monetary contraction will decrease output and increase both unemployment and inflation. Conversely, monetary expansion does not experience a significant output growth. Monetary expansion should be maintained at a longer period to increase output and purchasing power, then expected inflation will undergo a dynamic process to become positive as modified Phillips curve suggested. Keywords: expected inflation, inflation and unemployment tradeoff, Phillips curve JEL Classification: E31, E52, O42

Does the Mundell-Fleming Model Apply to Malaysia's Output?

Based on an extended Mundell-Fleming model, this paper finds that both fiscal expansion and monetary expansion raise output in Malaysia and that a lower real interest rate, a higher stock value, a lower real oil price and a lower expected inflation rate increase output. Hence, a managed floating system with no predetermined path of the exchange rate adopted by Malaysia may lead to better outcomes than the predictions of the Mundell- Fleming model that fiscal expansion does not raise output under a floating exchange rate but increases output under a fixed exchange rate whereas monetary expansion increases output under a floating exchange rate but does not affect output under a fixed exchange rate (Mankiw, 2019).

A full public debt restructuring overhaul is unlikely

Significance The stock of EM debt has multiplied since 2000, accompanied by legal difficulties for borrowers falling into distress. Some economists are calling for a complete overhaul of the system to handle sovereign debt crises, including the creation of an independent international organisation to manage it. Impacts By eroding tax bases and raising domestic and external debt repayment costs, COVID-19 will have a lasting impact on EM output. Together with collapsing exports, the fiscal blow from the crisis could trigger a wave of distressed governments to default on their debts. EM’s limited recourse to fiscal and monetary expansion could result in a lost decade for hundreds of millions of already poor people.

Development: Unconventional Monetary Policy on Bank Performance in Nigeria

The banking system plays an important role in the Environment and Development. This literature explored the influence of unconventional monetary rule on bank financial efficiency, with a vision to analysis to what degree unorthodox monetary expansion would impact deposit money banks’ performance using Nigeria as a case study for the developing economies in Africa from (2007-2017). Unorthodox monetary expansion is evaluated via assets of the apex bank to GDP ratio and deposit insured during the period. Using the random effect regression panel data analysis, the findings indicate that unconventional monetary policy is of a negative effect on deposit money bank performance. Further analyses show a negatively expressive relation amid unconventional pecuniary rule and Credit Money Banks performance with regards to deposit insurance coverage. On this basis, this literature principally recommends the apex bank of Nigeria to enact monitory regulations aiming to examine the response of credit finance banks’ performance to unconventional measures of monetary policy. The Unconventional Monetary Policy plays an important role in Development.

Fiscal package aims to ease Argentina default fears

Subject Fiscal and debt stabilisation plans. Significance Despite fears that President Alberto Fernandez’s government would implement populist measures (“putting money in consumers’ pockets”) financed through monetary expansion, his first steps in office indicated that the government aims to reduce the fiscal imbalance, seeking to reach a rapid agreement with debt creditors and regain access to foreign finance. Impacts The fiscal package may generate savings of 1.0-1.5% of GDP, but only if the government can resist increased spending demands. The government will aim to return to twin fiscal and trade surpluses. The global environment may prove adverse, with lower commodity prices affecting foreign exchange and tax revenues.