Joseph Middot; Stiglitz
Hamid Middot; Rashid
Governments around the world are responding to a strong response to the 2019 coronary virus crisis. The total amount of financial and monetary policy issued accordingly introduced is equivalent to 10%of the global GDP (GDP).However, according to the latest global evaluation report issued by the United Nations Department of Economic and Social Affairs, these stimulus measures may not stimulate consumption and investment as the policy makers expect.
The problem is that a large part of the funds are directly imported into the bank's capital buffer, leading to an increase in preventive reserves.The whole situation is very similar to the liquidity trap that John Maynard Keynes worried during the Great Depression.
The current stimulus measures are formulated in a hurry and almost panic to curb the economic impact brought about by the epidemic. This is understandable.Although this method of sprinkler sprinkler was neither targeted, it was not precise, many critics thought it was the only choice at the time.They believe that if there is no mass injection of emergency liquidity, it may cause a large area of bankruptcy, corporate capital loss, and a more difficult recovery.
Nowadays, all parties have clearly realized that the epidemic will continue for a longer period of time, rather than the weeks assumed when they first formulated these emergency measures.This means that all these schemes must be carefully evaluated from a long -term perspective.In a period full of uncertainty, family and enterprises will worry about future direction, and preventive savings usually increase.
The current crisis is no exception.Due to the concerns of the future and the reduction of extensive consumption opportunities, most of the funds that stimulate policy distribution may be idle in bank accounts of families and enterprises.At the same time, there are only a few reputable lenders, and banks may be forced to hold too much liquidity.
Unsurprisingly, from February to April, the excess reserves held by US deposit institutions almost doubled, from $ 1.5 trillion to $ 2.9 trillion.In contrast, the excess reserves held by banks held during the 2008 recession were only $ 1 trillion.A large increase in bank reserves show that so far, the implementation of the stimulus policies that have not been implemented so far has not produced a large number of multiplication effects, and it is obviously that the bank credit alone cannot get rid of the current economic deadlock.
To make matters worse, the current too much liquidity may be accompanied by high social costs.In addition to the conventional concerns of debt and inflation, there are sufficient reasons to worry that excess cash in the hands of banks will be used as financial speculation.The stock market is reversed sharply every day, and this fluctuations in turn may be normalized at the atmosphere that increases uncertainty, which in turn leads to more preventive behaviors and curb the consumption and investment required for recovery.
In this case, we will face liquidity traps and liquidity mysteries, that is, a large increase in currency supply, but the number of families and enterprises is limited.Careful designed stimulus measures may play a role after the crown disease epidemic control, but as long as the epidemic is still raging, the situation cannot return to normal.
Therefore, the current key is to reduce risks and increase consumer motivation.As long as the enterprise is still worried that the economy will still be weak in the six months or within one year, they will delay investment and delay recovery.This vicious circle can only be broken by the country.Governments of various countries must come forward. If the economy cannot recover at a certain time point, it will provide compensation to the enterprise to guarantee the current risks.
There is already a model for the measures in this area, that is, the Nobel Prize winner of the Nobel Prize in Economics, Kenneth Arrow and Gerard Debreu, and can be fulfilled in some predetermined conditions;Arrow-Debreu Securities.For example, the government can guarantee that if a family can buy a car today, and the virus epidemic curve is still at a certain point at a time after six months before it is now, its monthly car loan can be suspended.Similarly, you can use loans and mortgages to be repaid by income ratio to encourage the purchase of various durable consumer goods including housing.Similar regulations can also be applied to the actual investment of the enterprise.
The government should also consider issuing consumer vouchers to stimulate family consumption.This has been realized in China.Local governments in 50 cities in China can purchase digital coupons for various products and services within a certain period of time.The validity period marked by the coupon makes it an effective means to stimulate consumption and total demand in the short term, and this is also the most stimulating period.
Because the duration of the epidemic may be much longer than the original imagination, it is necessary to formulate more stimulating measures.For example, although the United States has spent 3 trillion US dollars in various forms of assistance in various forms of assistance, if there is no more and more carefully designed measures, these money will only make many companies take a few months, instead of truly saving it.they.
There is an effective method that has been working on several countries, that is, under the condition of retaining their employees, it helps them, and according to the reduction of corporate revenue, they will subsidize employees' salary and other expenses accordingly.In the United States, Pramila Jayapal and several other senators in Washington, Washington, put forward similar legislative suggestions.
Improper design stimulus schemes are not only ineffective, but also may contain crisis.The bad policy will lead to inequality, laid unstable seeds, and weaken the people's political support for the government when it is necessary to prevent the economy from falling into a long -term decline.Fortunately, we have other options, but we don't know if the government will adopt it.
The point of view of this article has nothing to do with the views reflected by the United Nations or its member states.
Author Joseph E. Stiglitz is the 2001 Nobel Prize winner of the Nobel Prize in Economics, a professor of economics at the University of Columbia, chief economist in the Roosevelt Institute, former senior vice president and chief economist of the World Bank; his latest work is the public, power, powerAnd profit: progressive capitalism in the era of anger.Hamid Rashid is the Director of the Global Economic Monitoring Division of the Department of Economic and Policy of the Ministry of Economic and Social Affairs of the United Nations.
English Title: Which Economic Stimulus Works?
Copyright: Project Syndicate, 2020
