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Online lecture – Financial Stability in Times of Epidemics

What is the likely impact of the COVID19 virus outbreak on financial stabiliy? On 26 March 2020, the Florence School of Banking and Finance organised an online lecture to address precisely this question.

The lecture was delivered by Professor Enrico Perotti, Professor of International Finance at the University of Amsterdam, who started the online event with the assumption that the coronavirus epidemic will most likely not wipe us out, but it can be anticipated that it will have a major impact on our habits, world trade and the virtual economy. In the end it might make us all wiser, but probably also poorer for a while.

In fact, the impact of the corona virus on the economy is that of a real shock, which reduces production and income, hits both the supply and the demand, and it disrupts trade and value chains. In addition, this shock is hitting in a moment in which most of the western economies are in a phase of economic stagnation, accompanied by excess savings and inflated asset prices.

Against this background, this online lecture first introduced a view of the of our current phase financial stagnation and its potential vulnerabilities, starting from the liquidity concerns for financial and credit institutions.

In the following part of the lecture, Professor Perotti the speaker discussed the main risk channels, discussing the monetary policy implications and the idea of a European safe asset. Finally, the presentation concentrated on the role of shadow banks in risk transmission.

This lecture was the first of a series of FBF online events that will discuss the economic and financial impact of the COVID-19 epidemic and will review Europe’s economic policy response to the virus.

To learn more about the contents discussed in the event, check out the article on the Coronavirus shock to financial stability by Enrico Perotti on Vox.EU.