Credit Misallocation During the European Financial Crisis


-- this post authored by Fabiano Schivardi, Enrico Sette, and Guido Tabellini

There is a widespread perception that under-capitalised banks can prolong crises by misallocating credit to weaker firms and restraining credit to healthy borrowers. This column explores the extent and consequences of credit misallocation in Italy during and after the Eurozone Crisis. Bank undercapitalisation may have been costly in terms of misallocation of capital and productive efficiency in the medium term due to the higher exit of healthy firms, but it had at best a limited role in aggravating the recession induced by the Eurozone Crisis.

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Arguments Against Free Trade and Comparative Advantage

July 15th, 2017
in history, macroeconomics

by Philip Pilkington

Fixing the Economists Article of the Week

In response to Krugman’s awful dismissal of heterodox economics about three years ago (see here) Ramanan has dug up an old quote reminding us that Krugman actually got his Swedish bank prize for being a defender of the status quo. In a 1996 lecture paper Krugman lays out a propaganda plan so that economists can argue in favour of free trade.

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Prepare for Turbulence

by John Mauldin, Thoughts from the Frontline

“The job of the central bank is to worry.”– Alice Rivlin

“The central bank needs to be able to make policy without short-term political concerns.”– Ben Bernanke

“… from the standpoint of the overall economy, my bottom line is we’re watching it closely but it appears to be contained.– Ben Bernanke, repeatedly, in 2007

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Money, Banking, and the Economic Process

Written by , The Somist Institute

Surely, there is a reason why in writing the General Theory Keynes was in search of “a theory of output as a whole.”1 Without it, one cannot understand money, banking, and the economic process.


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The Sraffian Versus the Marginalist Worldview: A Strong Case For Academic Pluralism

July 7th, 2017
in history, macroeconomics

by Philip Pilkington

Well, as I pointed out last week the Capital Controversies have come up once more. Now, again, there were a number of important issues in the controversies — the measurement of capital being one as this leads to some very salient criticisms of using production functions in empirical work — but I want to follow up on the same theme I discussed yesterday; namely, income distribution.

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