Prof David Vines & Prof Cameron Hepburn in conversation: "Global macroeconomic cooperation in response to the Covid-19 pandemic"

29 July 2020

Portrait of Professor David Vines

with Professor David Vines
 Professor of Economics

David Vines is Professor of Economics, and a Fellow of Balliol College, at the University of Oxford. He is also a Research Fellow of the Centre for Economic Policy Research. From 2008 to 2012 he was the Research Director of the European Union’s Frame...

Portrait of Professor Cameron Hepburn

with Professor Cameron Hepburn
 Battcock Professor of Environmental Economics

Cameron Hepburn is co-Director of the Economics of Sustainability Programme, based at the Institute for New Economic Thinking at the Oxford Martin School. He is the Battcock Professor of Environmental Economics at the Smith School of Enterprise and t...

The Covid crisis has caused the greatest collapse in economic activity since 1720. Some advanced countries have mounted a massive fiscal response, both to pay for disease-fighting action and to preserve the incomes of firms and workers until the economic recovery is underway.

But there are many emerging market economies which have been be prevented from doing what is needed by their high existing levels of public debt and - especially - by the external financial constraints which they face.

Professor David Vines, Professor of Economics at INET Oxford, discusses that there is a need for international cooperation to allow such countries to undertake the kind of massive fiscal response that all countries now need, and that many advanced countries have been able to carry out. So far such cooperation has been notably lacking; the contrast with what happened in the wake of the global financial crisis in 2008 is very striking.

The necessary cooperation needs to be led by the Group of Twenty, or G20, just as happened in 2008-9 since the G20 brings together the leaders of the world’s most important economies. This cooperation must also involve a promise of international financial support from the International Monetary Fund since otherwise international financial markets might take fright at the large budget deficits and current account deficits which will emerge, creating fiscal crises and currency crises and so causing such expansionary policies which need to be brought to an end.

This talk is in partnership with The Smith School of Enterprise and the Environment at the University of Oxford and the Oxford Review of Economic Policy.