Author Archives: Andrea Terzi

2016 USI FUS International Meeting

Keynes’s General Theory eighty years later: What lessons for the contemporary world?

Friday, September 16, 2016

Università della Svizzera italiana (USI) – Room A31 (Red building)

9:00-16:00 (Registration begins at 8:30)

The events of the Global Financial Crisis that led to the worst economic downturn since the Great Depression have seriously challenged the validity of well-established, orthodox policy models, and have offered an opportunity to revive Keynesian policies. Concurrently, however, the meagre success of the—seemingly—massive use of macroeconomic policies has challenged the belief that stronger policy intervention can be the answer to what has been named “secular stagnation”. On the occasion of the 80th anniversary of the publication of Keynes’s masterpiece and the 70th anniversary of his death, the Istituto di Economia Politica of the Università della Svizzera italiana and the Department of Economics and Finance of Franklin University Switzerland have opened a forum for discussion of this question that is highly relevant to the world and the European economy, and thus to an open economy like Switzerland. Is Keynes’s General Theory still relevant to understand policy effectiveness, to reform the currency union in Europe, or to rethink our current policy models?


Speakers: Riccardo Bellofiore, University of Bergamo, Italy; Alvaro Cencini, Università della Svizzera italiana, Switzerland; Nadia Garbellini, University of Bergamo, Italy; Claude Gnos, University of Bourgogne, France; Marc Lavoie, University of Ottawa, Canada and University of Paris 13, France; Virginie Monvoisin, Grenoble Ecole de Management, France ; Louis-Philippe Rochon, Laurentian University, Canada; Sergio Rossi, University of Fribourg, Switzerland; Andrea Terzi, Franklin University Switzerland, Switzerland; Guillaume Vallet, University of Grenoble, France and University of Geneva, Switzerland.

2014 Mecpoc Dialogue

The 2014 Mecpoc Dialogue was held on April 1, 2014 in the Nielsen Auditorium, Franklin University Switzerland. Danilo Taino (Corriere della Sera) interviewed Marco Mazzucchelli (Bank Julius Baer) and Warren Mosler (Center for Fulll Employment and Price Stability) on  Euro Governance and Policies: Fit for Purpose?

The Mosler proposal for funding reconstruction in the city of L’Aquila

On the 6th of April, 2009 the Italian city of L’Aquila, located in the region of Abruzzo in central Italy, was hit by a high magnitude earthquake that killed more than 300 people. The quake destroyed many historical buildings in L’Aquila including medieval churches, basilicas and cathedrals. Important structures which collapsed included the National Museum of Abruzzo located in a 16th-century castle, the oldest gate to the city, and the Church of St. Augustine which held the state archives.

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2013 Mecpoc Lecture

The 2013 Mecpoc Lecture will be held on 25 November, 2013 in the Franklin Auditorium.
David Colander, Distinguished Professor of Economics at Middlebury College, will lecture on Functional Finance, Deficits, Debt, and the European Economic Malaise.

Why the Reinhart-Rogoff paper was flawed right from the start

By: Andrea Terzi

At this point, it seems that everybody with an internet connection knows about Herndon, Ash, and Pollin’s (HAP) rebuttal of Reinhart-Rogoff’s (RR) paper on public debt and growth. Minutes after the news started to go round the web though, I was asked what I thought by friends whose interests are quite removed from economics. They were shocked that Harvard professors could make such embarrassing mistakes in their excel file, and that austerity decisions could be based on such an imprudent error.

This is my perspective

Pro-cyclical austerity and rising unemployment in Europe: No surprise!

By Andrea Terzi

On 18 August 2011, I had shared my concerns about the ECB’s approach to financial balances that seemed to reveal:

a) a misunderstanding of how sector financial balances are logically connected; and

b) a misplaced optimism about the fact that austerity measures were helping to “rebalance” sectors.

One and a half years later, those concerns are (sadly, yet inevitably) proved warranted.

The chart below shows overall net government spending in the euro area in billions of euros (what most people call “government deficit”) and the overall euro unemployment rate.

It clearly illustrates the consequence of the austerity grip on the eurozone.

From 1999 through 2009, lacking any fiscal policy rule aimed at full employment in Europe, every time the private sector fell short of savings, the economy went into recession. Each time, this triggered the automatic countercyclical response of the fiscal balance (i.e., higher unemployment, falling tax receipts, and a larger ‘government deficits’). The rising ‘deficit’ eventually provided the greater private savings that eventually helped the economy reverse its cycle. This explains why unemployment is correlated with net government spending, until 2009.

After 2009, however, as the Stability and Growth Pact was made an increasingly harder constraint, fiscal policy ended in the grip of austerity measures, and became pro-cyclical. The standard countercyclical fiscal forces were prevented from operating, and the forced reduction of public deficits has inhibited the private sector from accumulating financial savings as desired.

Far from indicating a positive “rebalancing” of sector balances, the reduction of nominal government deficits and the simultaneous reduction of financial balances in the private sector is the symptom of a building pressure that is pushing the eurozone economy towards higher unemployment rates and economic depression.

Olli Rehn and ‘distinguished’ economists

By Andrea Terzi

The European Commissioner for Economic and Monetary Affairs, Olli Rehn, has said:

What I don’t understand is where on earth the stimulus money could have come from—I sincerely hope that people who are cleverer than me will suggest alternative ways of getting credit flowing into Europe.

Reuters reports that Rehn was quoted as saying:

So far, distinguished economic experts had not suggested any financially or politically realistic alternative.

I do not know who Commissioner Rehn includes under the definition of ‘distinguished’. Anyway, this is a brief lesson on ‘stimulus’ (my self-imposed limit was 500 words) for Olli Rehn’s perusal.

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A narrow path ahead for Europe: And it’s France and Germany, again

By Andrea Terzi

French industrial production fell in January as Europe’s second-largest economy teetered on the brink of its third recession in four years.

The current euro predicament has its roots in the troubles of the euro predecessor, the European Monetary System (EMS), and in the problems of the two leading countries of the European Union (EU) and of the Economic and Monetary Union (EMU), namely France and Germany.

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Do exports LOWER a nation’s living standards?

By Andrea Terzi

In the U.S. and (particularly) in euro countries, policies aimed at stimulating exports are (sadly) considered an effective response to lagging growth (U.S.) and recession (Euroland). Viewing a net export balance (i.e., an international trade surplus) as an economic virtue and a growth engine is a relic of Mercantilism that has had a powerful comeback, not coincidentally, with the abandonment of fiscal policy as a counter-cyclical tool.

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