The Eurozone Crisis and Lessons from Latin America
Faculty lecture by Aaron Tornell, UCLA, Economics.
Published: Friday, November 30, 2012
Imbalances across Eurozone countries are growing at an alarming pace. This situation, which resembles the Latin American crises of the 1980s, is unsustainable and raises a number of critical questions. What are the mechanisms by which the debts of Southern to Northern to Eurozone countries have been generated? Is this process stabilizing or will the Eurozone break up? Why have Southern Eurozone countries not implemented reforms fast enough? Building on previous research on Latin America, Professor Tornell aims at addressing these questions empirically and at building a theoretical political economy explanation for the worrisome developments indicated above. In his recent work, he has documented the fact that the European Central Bank (ECB) is the main conduit by which inter-country transfers are taking place. This is occurring in an unplanned way and is generating tensions within the EU and ECB. In the absence of strict conditionality, policies intended to help government reforms have the opposite effect. Professor Tornell will analyze the effects of EU and ECB policies on governments’ willingness and ability to implement structural reforms and fiscal adjustments in a timely manner.
Aaron Tornell is Professor of Economics at UCLA, specializing in International Economics and Political Economy. His research interests include lending booms and financial crises, robust forecasting, and asset pricing.