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. COVID-19 debt relief. London

• Working Paper Type: Working Paper
• Deposit Date: Jan 6, 2021
• Publicly Available Date: Apr 27, 2025
• Pages: 1-19
• Keywords: Covid, sovereign debt
• Publisher URL: https://www.cefims.ac.uk/research/papers/DP160/