Fiscal Stabilization in the United States: Lessons for Monetary Unions

The debate about the use of fiscal instruments for macroeconomic stabilization has regained prominence in the aftermath of the Great Recession, and its relevance has suddenly increased further, after the recent Covid-19 shock. The analysis of fiscal stabilization in the United States, a monetary union equipped with a common fiscal capacity, has often informed the literature on the European EMU and could serve as a reference for its possible future reforms. This paper expands that literature in three ways: first, by measuring stabilization not only as inter-state risk-sharing of asymmetric shocks, but also as intertemporal stabilization of common shocks;second, by doing this for specific items in the US federal budget, both on the revenue and on the expenditure side;and third, by also measuring the impact of the federal system of unemployment benefits and of its extension as a response to the Great Recession. Corporate and personal income tax, on the revenue side, and social security benefits and federal grants, on the spending side, are the most effective items. The US federal system of unemployment insurance provides great stabilization in the event of a large shock, in particular when enhanced by the discretionary program of extended benefits. These findings imply that a proper design of the budget can maximize its stabilization effect, when it helps bridging the gap between higher mobility of capital and lower mobility of labor, by collecting revenues based on the income of the most mobile factor (corporate income tax) and providing support to the income of the least mobile factor (social security).

International Macroeconomics: From the Great Financial Crisis to COVID-19, and Beyond

This Mundell–Fleming lecture reviews some of the main developments in international macroeconomics since the early 2000s. It highlights four important areas of progress: (a) on international pricing and invoicing;(b) on sectoral trade and production networks;(c) on the cross-border allocation of capital and the role of global financial intermediaries;(d) on cross-border externalities and prudential policies. It then explores three specific questions, relevant for future research and policy: (a) the implementation of optimal prudential policy via ‘basis control;' (b) recent developments about the US external balance sheet and its ‘exorbitant privilege;' and (c) the reform of the International Financial and Monetary System.

COVID-19 Vaccination and Financial Frictions

We study the COVID-19 epidemic in emerging markets that face financial frictions and its mitigation through social distancing and vaccination. We find that restricted vaccine availability in emerging markets, as captured by limited quantities and high prices, renders the pandemic exceptionally costly in these countries, compared with economies without financial frictions. Improved access to financial markets enables a better response to the delay in vaccine supplies, as it supports more stringent social distancing measures before wider vaccine availability. We show that financial assistance programs to such financially constrained countries can increase vaccinations and lower fatalities, at no present-value cost to the international community.

Detection of human adenovirus F41 in wastewater and its relationship to clinical cases of acute hepatitis of unknown aetiology

As of 8 July 2022, the World Health Organization (WHO) have reported 1010 probable cases of acute hepatitis of unknown aetiology in children worldwide, including approximately 250 cases in the United Kingdom (UK). Clinical presentations have often been severe, with liver transplantation a frequent clinical outcome. Human adenovirus F41 (HAdV-F41) has been detected in most children with acute hepatitis, but its role in the pathogenesis of this infection has yet to be established. Wastewater-based epidemiology (WBE) has become a well-established tool for monitoring the community spread of SARS-CoV-2, as well as other pathogens and chemicals. In this study, we adopted a WBE approach to monitoring levels of HAdV-F40/41 in wastewater before and during an acute hepatitis outbreak in Northern Ireland. We report increasing detection of HAdV-F40/41 in wastewater, concomitant with increasing numbers of clinical cases. Amplicon whole genome sequencing further classified the wastewater-derived HAdV as belonging to the F41 genotype which in turn was homologous to clinically derived sequences. We propose that WBE has the potential to inform community surveillance of HAdV-F41 and can further contribute to the ongoing global discussion supporting HAdV-F41 involvement in acute hepatitis cases. © 2022 The Authors

Slowbalisation in the Context of US-China Decoupling

While it is too early to confirm the depth and the sustainability of this new trend towards slower globalisation, it may be happening in more domains than we are fully aware of, at least for the near term given the renewed backdrop of the Russia-Ukraine war and the wider use of sanctions globally.

A link between severe hepatitis in children and adenovirus 41 and adeno-associated virus 2 infections.

Over the past few months there have been reports of severe acute hepatitis in several hundred, otherwise healthy, immunocompetent young children. Several deaths have been recorded and a relatively large proportion of the patients have needed liver transplants. Most of the cases, so far, have been seen in the UK and in North America, but it has also been reported in many other European countries, the Middle East and Asia. Most common viruses have been ruled out as a causative agent; hepatitis A virus (HAV), hepatitis B virus (HBV) and hepatitis C virus (HCV) were not detected, nor were Epstein-Barr virus (EBV), cytomegalovirus (CMV) and human immunodeficiency virus (HIV) in many cases. A small proportion of the children had been infected with SARS-CoV-2 but these seem to be in a minority; similarly, almost none of the children had been vaccinated against COVID-19. Significantly, many of the patients were infected with adenovirus 41 (HAdV-F41). Previously, HAdV-41 had not been linked to hepatitis and is usually considered to cause gastroenteritis in both immunocompetent and immunocompromised patients. In two most recent studies, adeno-associated virus 2 (AAV2) was detected in almost all patients, together with species C and F HAdVs and human herpesvirus 6B (HHV6B). Here, I discuss the possibility that a change in tropism of HAdV-41 and changes in AAV2 may be responsible for their links to acute hepatitis.