Time: 13:00-15:00 (UK Time), Wednesday, 12 May 2021
Presenter: Dr Juan Castaneda, University of Buckingham
Chair: Professor Victor Murinde, SOAS University of London
Online venue: Click here to join the seminar on Microsoft Teams (For any inquiry about how to join the online seminar, please contact Dr Meng Xie: xm1@soas.ac.uk)

Abstract
The coronavirus-related slump is a very unusual episode in modern economic history. An exceptional feature is that the crisis is mainly due to a supply-side shock in the economy, and not to a drop in aggregate demand or spending. Developed and developing economies have been put in ‘lock-down’ by governments, while international trade and world-wide supply chains have been severely disturbed. In the normal course of events with demand given, a negative supply shock first provokes a fall in output and an increase in prices. The greater the fall in output relative to demand, the more severe the inflationary effects of the supply shock will be. However, governments have reacted to the current crisis as if the falls in output reflected a deficiency of aggregate demand, as in a ‘standard’ recession. In a desperate effort to sustain people’s income and companies, a wide range of budget measures have been implemented by governments in a record time. These have widened budget deficits by several percentage points of GDP. In a similar vein, central banks have acted promptly to provide as much cash as needed both to governments, to help in financing the budget deficits, and to the banking sector, to support asset expansion. Central banks have also resumed large scale financial asset purchases from banks and non-banks (so-called ‘quantitative easing’), mostly of government and corporate bonds. The reaction of central banks and financial regulators to the current crisis is in sharp contrast to their response to the Global Financial Crisis (2008-2010). Rather than ‘punishing’ banks with demands for higher ratios of capital to risks assets (which by 2010 were over 60% higher than they had been three years earlier), they have relaxed the bank capital requirements. As a result of it all, enlarged government deficits have been largely monetised by national central banks, resulting in extraordinary rates of growth of money (broadly-defined) since March 2020; rates unseen in the USA in modern peacetime. We will assess in the webinar the expected inflationary effects of these developments in the medium term (2021-2022)

Presenter

Dr Juan Castañeda

Juan is the Director of the Institute of International Monetary Research since 2016 and senior lecturer in Economics at the University of Buckingham. Juan has experience working and researching in monetary policy and central banking. He has worked with the European Parliament’s Committee of Economic and Monetary Affairs and submitted written evidence for a UK Parliament report on the euro. He has been an Honorary Senior Visiting Fellow in Cass Business School (London) and a visiting researcher at the Centre of Monetary and Financial Alternatives at Cato (Washington, DC) and at UFM university in Guatemala. He has authored and edited academic books and research articles on the economic crises, monetary policy and central banking. He is the review editor of Economic Affairs. In 2017, Juan he was appointed as “External Expert” in Economics of COST, the European Cooperation in Science and Technology Agency (COST is supported by the EU Framework Programme Horizon 2020). Since September 2018, he has also been a member of the Institute of Economic Affairs’ Shadow Monetary Policy Committee.