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Priorities for the COVID-19 Economy (Project Syndicate, 7 min read) A V-shaped recovery in the US is a fantasy, says Nobel laureate Joseph Stiglitz. He foresees a contracting labour-intensive sector during the COVID crisis further fueling rising inequalities in the US. He believes investment towards green transition would be highly stimulative for labour-intensive industries. In contrast, he criticised the Fed action for supporting the junk-bond market, which raises the concern of ‘moral hazard’ and limits ‘dynamism’ and ‘growth’ in the long run.
COVID Dominance: Pandemic Shocks and Fiscal-Monetary Policies in the Euro Area (Vox EU, 15 min read) Adjustments in Eurozone credit default swap spreads have diverged substantially from levels implied by models. This article tries to explain why, citing mortality outcomes, fiscal announcements and COVID-19-specific factors as major contributors. Specifically, they find that systematically riskier countries have issued less stimulus in relation to GDP. Also, mortality outcomes and policy announcements, rather than traditional determinants like fiscal space and systematic risk, drove EZ CDS adjustment over the pandemic period.