Course description
The surge of public debt in the wake of the crisis has led to doubts about the efficacy of deficit spending, and triggered fears about the negative consequences of excessive levels of public debt. At the same time, the financial-deepening that characterizes the developed economies has brought to attention the key role played by “safe assets” in the credit/investment process and the role that public debt securities play in offsetting the scarcity of safe assets that the private sector can effectively generate. This challenges the proposition of Ricardian Equivalence. Moreover a recent strand of literature empirically funded and theoretically developed claims that sovereign debt securities play the role of “quasi money” and are necessary for financial stability and growth. With reference to the EU, it provides the economically funded background for euro-bonds. This course covers these topics focusing on the questions that are open to theoretical and empirical analysis.
Topics
Learning outcomes
At the end of the course, students should have acquired sufficient knowledge to understand and model the interactions between sovereign debt and the macro-economy and to formulate a cutting-edge research question in a proposal and carrying out the proposed research.
Teaching methods
For each topic there will be first regular lecturing illustrating the issues and the modeling, and then assigned readings to students so as to enable effective participation in classroom discussions, the assessment of articles’ marginal contributions and the identification of the questions/issues that are open to further analysis.
Assessment methods
Syllabus
Ricardian equivalence, Debt Sustainability, monetary dominance and fiscal challenges:
Financial-deepening and the role of sovereign debt:
Public Debt, Banks, and Credit
Focus on the Eurozone sovereign debt markets and crisis: