Paolo Savona | LUISS Guido Carli (original) (raw)

Papers by Paolo Savona

Contributions to economics, Dec 31, 2022

The question of future arrangements for the financial system in the light of the current imbalanc... more The question of future arrangements for the financial system in the light of the current imbalances and the accumulation of international reserves has provoked a wide range of responses, from traumatic collapse to benign adjustment. These views are canvassed here. Rather than arguing the case of currency realignments, this paper concentrates on the potential impact of diversification by Central Banks on the operation of asset markets. The paper argues that markets in which Central Banks hold significant asset stocks can be substantially affected by both their actions and their perceived preferences towards those assets. This is illustrated using the recent historical examples of the divestment of gold reserves by many Central Banks in the 1990s, and the effects of sales of US Treasuries from reserves by the Hong Kong Monetary Authority in 1998.

Social Science Research Network, 2010

Social Science Research Network, 2011

The close economic ties between Europe and the United States and the crucial global monetary and ... more The close economic ties between Europe and the United States and the crucial global monetary and financial role played by the City of London were the conduits for the lightning-fast spread of the crisis triggered by the sub-prime mortgage defaults in the U.S. and the consequent fall in global real aggregate demand in 2008. The effects of this crisis differed among euro area countries, among non-euro European Union countries, and among such neighbouring nonmembers as Turkey and Russia. The differences appear to have been sharpest within the euro group. It is well known that the euro area is not an optimal currency area, and the consequences of this condition are manifold. 1 Banking and financial arrangements remain differentiated within the euro area, and national supervisory authorities differ in vigour and efficacy. Some analysts hold that certain countries, Italy among them, lack a truly modern financial system, which is why their banking and securities markets were less exposed to the global financial crisis of 2007-08. This analysis has been presented as a criticism, but, by comparison with the consequences of the more 'modern' American and British systems, it may not be such. Some members of the European Union have not completed a return to a market economy after their experiences of central planning and being 'governed by outside' (i.e., by Soviet Russia). Turkey is torn between modernism in the broad sense and Islamic revival. Post-communist Russia is a case apart for a few reasons, including its large territory outside of physical Europe. It is also well known that although the euro was created in the hopes that it would bring political union in its wake ('money first', in the famous slogan of former European Commission president Roy Jenkins, although his own country opted out of the EU single currency), no such union has ever come about. Rather, the goal may have receded, leaving a legacy of lame institutional arrangements in the EU in which the rules of competition apply to all countries but are concentrated on industry (which represents no more than a quarter of European gross domestic product [GDP]), while the single currency (with its irrevocably fixed exchange rates) applies to only half the members. Meanwhile, fiscal policy remains in the hands of the single member states, but under the constraints of the Stability and Growth Pact agreed to in Amsterdam in 1997, which has at its heart a ceiling on the general government deficit of 3 percent of national GDP. Given these patchwork arrangements, more than anything else the financial crisis has eaten up the stock of household savings, in all its various forms, and taken a huge bite out of banks' capital and reserves. European banking and financial systems have withstood the transAtlantic tidal wave. There were a few instances of nationalization. Some cases sizable were sizeable (such as the Royal

Moneta e Credito, Apr 26, 2018

Moneta e Credito Quest'opera è distribuita con licenza internazionale Creative Commons Attribuzio... more Moneta e Credito Quest'opera è distribuita con licenza internazionale Creative Commons Attribuzione-Non commerciale-Non opere derivate 4.0 .

BANCARIA, 2013

The continuing statements about the fall in the households’ propensity to save are not based on a... more The continuing statements about the fall in the households’ propensity to save are not based on a deep analysis of the causes, and in particular the tax burden increase, low interest rates, lower protection offered to the workforce. An economic policy aimed to protect savings and to promote growth it is therefore necessary

Metroeconomica, Feb 1, 1970

'ltalia (*) [ I) H.ASC.% l>'IT.\LI.A: Relaiioize per /'arzrin r@d (I X X v) , Tip. Banca d'ltalia... more 'ltalia (*) [ I) H.ASC.% l>'IT.\LI.A: Relaiioize per /'arzrin r@d (I X X v) , Tip. Banca d'ltalia, Koma. rc~h9, page 60. (*) H;\sc.\ II'IT.ALI.I: 12ela:ione p r y l'airrio ry67 (LXXI\.i, Tip. I3anca d'ltalia. Koina. 1968, pages .331-2.

PSL Quarterly Review, Oct 11, 2013

The present paper analyses policies for and developments in Italian international reserves in the... more The present paper analyses policies for and developments in Italian international reserves in the seventies and compares them with similar developments in industrial countries. Particular emphasis is placed on the study of the possibilities of influencing the terms of trade in the short to medium run by an appropriate exchange rate policy coupled with the use of international reserves. Further attention is given to the adequacy of Italian international reserves, particularly in the light of the position of the country as a borrower in international capital markets.

The paper deals with the problem of defining money in a system with derivatives. We conclude that... more The paper deals with the problem of defining money in a system with derivatives. We conclude that derivatives have to be included in the definition of money, and support our conclusions with an econometric test on the New York Stock Exchange (NYSE) and Chicago Board of Trade indexes. We focus on the direct relationship between derivatives' supply and the interest rate, the analytical basis of speculative money demand introduced by Keynes and the foundation of the Fratianni-Savona model to single out the international monetary base. Consequently, monetary aggregates measured by international institutions, such as the Bank for International Settlements, underestimate the actual offshore market size. Derivatives are the primary instruments used by speculators. There is money, mainly in reserve currencies, that is not controlled and that may cause systemic instability (e.g., the recent Asian crisis).

BANCARIA, Sep 1, 2014

Recent official figures on savings and investments in Italy cannot clarify the relationship betwe... more Recent official figures on savings and investments in Italy cannot clarify the relationship between growth and savings, while it is clear that a key role is played by the fall of real investments and of households consumption. Investments and savings have to be strongly promoted, aiming to increase R&D and to reduce the level of taxation

DOAJ (DOAJ: Directory of Open Access Journals), Sep 1, 2010

Finance and Market, Dec 27, 2017

The Euro is the logical consequences of the European common market according to the principle 'on... more The Euro is the logical consequences of the European common market according to the principle 'one market, one money', to avoid unfair competition changing internal monetary parities. Anyhow it is a necessary but insufficient condition being the institutional architecture weak. The European Central Bank cannot perform as the other main central banks: cannot act as lender of last resort or intervene on the exchange market to counteract speculation; the risks on national exchange rates has been transferred to member-countries sovereign debts without a non-deflationary solution to reenter the excesses in the agreed ratio on GDP. The Eurozone is a non-optimal currency area without a policy Mundell's type. The suggested solutions by the Europeans are to reform national labor markets and public bureaucracies, and by the idealists to create a political union.

Routledge eBooks, Apr 22, 2016

Until Lehman Brothers' bankruptcy in September 2008, the conventional wisdom was that the crisis ... more Until Lehman Brothers' bankruptcy in September 2008, the conventional wisdom was that the crisis was the result of problems in the financial sector. However, after the dramatic falls in industrial production in countries such as Japan and Germany starting in the last quarter of 2008, it became clear that the origins of the crisis were deeper. This paper argues that there was an economic crisis that was due to the bursting of a property and stock bubble in the US and a number of other countries. Just as in Japan in the 1990's, this greatly affected the real economy. The problems in the financial system were a symptom rather than a cause, but there was a strong feedback effect into the real economy. The structure of the global financial system and the nature of banking regulation have been severely inadequate. The paper suggests reforms in the structure of the IMF, the governance of central banks and the form of banking regulation. Resumen Antes de la quiebra de Lehman Brothers en septiembre del 2008, la sabiduría popular decía que la crisis se originaba en problemas en el sector financiero. Sin embargo, tras las drásticas caídas de la producción industrial en países como Japón y Alemania a partir del último trimestre de ese año, quedó claro que había que buscar más profundo. Este documento argumenta que hubo una crisis económica al explotar una burbuja inmobiliaria y accionaria en Estados Unidos y otros países. Al igual que en Japón en los noventa, los efectos en la economía real fueron enormes. Los problemas del sistema financiero fueron más un síntoma que una causa, aunque hubo una fuerte realimentación hacia la economía real. La estructura del sistema financiero global y la

Modern Economy, 2018

The scope of this paper is to examine the complications raised by technical innovations in the fi... more The scope of this paper is to examine the complications raised by technical innovations in the financial field (fintech). The conclusion of this enquire is that the current institutional architecture cannot guarantee monetary and financial sustainability as long as Governments decide to reform it using the already available instruments (cryptocurrency, blockchain, algorithms) instead of leaving them free to operate or limiting their use as they are doing. The same goes for any tentative to restate bank credibility forecasting money and financial instability starting from big data treated with traditional econometric methods.

Palgrave Macmillan UK eBooks, 1990

This chapter deals with the relationships that exist between two important elements of world econ... more This chapter deals with the relationships that exist between two important elements of world economic growth: foreign trade and the monetary order. But while the former concept is quite definite, the latter is much more difficult to define. In fact, if one wishes to capture the international dimension of monetary order, any conceptual definition of it — at least after the end of the institutional framework of Bretton Woods — becomes quite elusive.

Atlantic Economic Journal, Oct 26, 2015

The true problem for the future of the Euro is to get a wider statute for the European Central Ba... more The true problem for the future of the Euro is to get a wider statute for the European Central Bank (ECB) similar to those of other central banks, notably the Fed, to permit better monetary policy. This means the power to act as a lender of last resort or “whatever it takes” (Draghi 2012). People consider this possibility tied to the political will of the main member states (Germany and the Netherlands, partly France). However, two other problems would remain unresolved if the Euro is to have full legitimacy as a paper money: a state behind it and a common Eurozone fiscal policy. This means a move to a political union, which is less possible than the approval of a new ECB statute. The existence of these problems does not mean that the Euro cannot survive, but that it depends on the will of both the market and the owner of official reserve denominated in Euro. It also depends on acceptance by member countries affected by the negative effects of not having a true and free lender of last resort and a targeted policy to resolve the weakness of the non-optimal currency area of the Eurosystem which preexisted the birth of the Euro. This is why the future of the Euro still lies in its past, not having found a consensus on what to do or leaders capable of filling the gap. Collapse is always possible.

PSL Quarterly Review, 1998