COVID-19 debt relief

Becchetti, Leonardo; Scaramozzino, Pasquale

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.

Citation

Becchetti, L., & Scaramozzino, P. (2021). COVID-19 debt relief. Scienza e pace, 12(2), 1-25

• Journal Article Type: Article
• Acceptance Date: Oct 1, 2021
• Publication Date: Dec 11, 2021
• Deposit Date: Apr 4, 2022
• Publicly Available Date: Apr 4, 2022
• Journal: Scienza e Pace - Science and Peace
• Electronic ISSN: 2039-1749
• Peer Reviewed: Peer Reviewed
• Volume: 12
• Issue: 2
• Pages: 1-25
• Keywords: Covid, sovereign debt
• Publisher URL: https://www.cefims.ac.uk/research/papers/DP160/
• Related Public URLs: https://scienzaepace.unipi.it/index.php/it/annate/item/download/524_e08fe67d00e72aef31f3ce44c7e58b98.html