SAFE Policy Lecture: Ashoka Mody (Princeton University)
Speaker: Ashoka Mody, Visiting Professor, International Economic Policy, Princeton University
Title: The ECB between a Rock and a Hard Place
The financial crisis disclosed political divisions among euro member states and increased economic divergence within the monetary union. Today, the European Central Bank (ECB) is between a rock and a hard place. If the ECB winds down its quantitative easing program (QE), the euro will strengthen further and real interest rates will rise, which will increase financial fragility along the Italian fault line. If the ECB extends its QE, it will accumulate more Italian bonds at high prices and face the risk of large losses when it eventually sells them.
Ashoka Mody is Charles and Marie Robertson Visiting Professor in International Economic Policy at the Woodrow Wilson School, Princeton University. He is the author of “Euro Tragedy: A Drama in Nine Acts”. Before going to Princeton, he was Deputy Director in the International Monetary Fund’s Research and European Departments. He was responsible for the IMF’s Article IV consultations with Germany, Ireland, Switzerland, and Hungary, and for the design of Ireland's financial rescue program. Earlier, at the World Bank, his management positions included those in Project Finance and Guarantees and in the Prospects Group, where he coordinated and was principal author of the Global Development Finance Report of 2001. He has advised governments worldwide on developmental and financial projects and policies, while writing extensively for policy and scholarly audiences. He is also a Senior Non-Resident Fellow at the Centre for Financial Studies, Frankfurt.