COVID-19 Debt Relief

19 Pages Posted: 15 Dec 2020

See all articles by Leonardo Becchetti

Leonardo Becchetti

University of Rome Tor Vergata - Faculty of Economics

Pasquale Scaramozzino

University of Rome II - Faculty of Economics; University of London - School of Oriental and African Studies (SOAS); University of London - Centre for Financial and Management Studies (CeFIMS)

Date Written: December 11, 2020

Abstract

The COVID-19 pandemic has been a global shock with dramatic consequences on debts of governments called to alleviate the economic and social impact of the crisis on firms and households. We explore conditions for the feasibility of (COVID-19 generated) government debt relief, justified in principle by the exogenous characteristics of the shock. We outline several technically and economically feasible ways (involving debt “freezing”, debt rescheduling or outright debt cancellation) for achieving this goal and discuss their consequences on moral hazard and the Central Bank balance sheets, as well as their potential impact on CB’s independence, reputation and, ultimately, on inflation and exchange rates. We also discuss the distributive concerns which arise when a CB (as in the Eurozone) operates in a Union with several sovereign member states.

Keywords: debt relief, COVID-19, European Central Bank

JEL Classification: E58, E52

Suggested Citation

Becchetti, Leonardo and Scaramozzino, Pasquale, COVID-19 Debt Relief (December 11, 2020). Available at SSRN: https://ssrn.com/abstract=3746917 or http://dx.doi.org/10.2139/ssrn.3746917

Leonardo Becchetti (Contact Author)

University of Rome Tor Vergata - Faculty of Economics ( email )

Via Columbia, 2
I-00133 Rome
Italy

Pasquale Scaramozzino

University of Rome II - Faculty of Economics ( email )

Via Columbia n.2
Rome, 00100
Italy

University of London - School of Oriental and African Studies (SOAS) ( email )

Thornhaugh Street
Russell Square: College Buildings 541
London, WC1H 0XG
United Kingdom

University of London - Centre for Financial and Management Studies (CeFIMS)

Thornhaugh Street
London, WC1H 0XG
United Kingdom

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