Jaume Ventura talks about the objectives, challenges, and potential impact of his ERC Advanced Grant Project.
Could the massive wartime debt accumulated by Britain’s government in the 18th and 19th centuries have helped the country industrialize first and become the world’s leading economy? Given the customary association of debt with dissipation and ruin, this may come across as an unlikely proposition, yet this is exactly the story that Jaume Ventura and Hans-Joachim Voth have found in the historical evidence.
Barcelona GSE research on VoxEU.org by Alberto Martín and Jaume Ventura
There is a widespread view among macroeconomists that fluctuations in collateral are an important driver of credit booms and busts. This column distinguishes between ‘fundamental’ collateral – backed by expectations of future profits – and ‘bubbly’ collateral – backed by expectations of future credit. Markets are generically unable to provide the optimal amount of bubbly collateral, which creates a natural role for stabilisation policies. A lender of last resort with the ability to tax and subsidise credit can design a ‘leaning against the wind’ policy that replicates the ‘optimal’ bubble allocation.
Fernando Broner, Aitor Erce, Alberto Martín, and Jaume Ventura provide a new and original view of this sovereign debt crisis, drawing heavily from insights obtained in their earlier theoretical work.