Public Lecture by James Hamilton (University of California, San Diego) in honor of Evgeny G. Yasin

On Wednesday, April 9 HSE hosted the academic visit of Prof. James Hamilton (University of California, San Diego)

On Wednesday, April 9 HSE hosted the academic visit of Prof. James Hamilton (University of California, San Diego), who is one of the world's most authoritative expert in econometrics. Prof. James Hamilton is the authour of the book "Time Series Analysis" and many other papers in econometrics, monetary policy, etc.

Prof. James Hamilton gave the public lecture: «Crunch Time: Fiscal Crises and the Role of Monetary Policy», devoted to the jubilee of the HSE Academic Supervisor Evgeny G. Yasin.

Abstract: Countries with high debt loads are vulnerable to an adverse feedback loop in which doubts by lenders lead to higher sovereign interest rates which in turn make the debt problems more severe. We analyze the recent experience of advanced economies using both econometric methods and case studies and conclude that countries with debt above 80% of GDP and persistent current-account deficits are vulnerable to a rapid fiscal deterioration as a result of these tipping-point dynamics. Such feedback is left out of current long-term U.S. budget projections and could make it much more difficult for the U.S. to maintain a sustainable budget course. A potential fiscal crunch also puts fundamental limits on what monetary policy is able to achieve. In simulations of the Federal Reserve’s balance sheet, we find that under our baseline assumptions, in 2017-18 the Fed will be running sizable income losses on its portfolio net of operating and other expenses and therefore for a time will be unable to make remittances to the U.S. Treasury. Under alternative scenarios that allow for an emergence of fiscal concerns, the Fed’s net losses would be more substantial.