Eric Pentecost

Eric PentecostEric Pentecost is Professor of Economics at Loughborough University (UK), visiting Professor of Economics at Claremont Graduate University (USA) and member of the Advisory Council for the Claremont Institute for Economic Policy Studies (CIEPS). His research interests are in Macro and Monetary Economics on which he has written 5 books and published some 70 academic papers. Formerly, Dr Pentecost was an Economics Analyst in the Bank of England, a visiting professor at Vanderbilt University, the University of Antwerp, and Fellow of Wolfson College, Canbridge. He has served as an member Executive Committee member of the Royal Economic Society, Chairman of the QAA Benchmarking Committee for Economics and was elected a Fellow of the Academy of Social Sciences (FAcSS) in 2015.

Papers Published in World Economics:

Is Another Eurozone Crisis Coming?

The Eurozone crisis in the early 2010s was a landmark event. However, markets did not seem to see it coming. It was only once the crisis had begun that markets received a wake-up call, and risk premia began to rise sharply. Markets then began to act in a way that was more consistent with the efficient markets hypothesis. However, in the subsequent aftermath of the crisis, risk premia have fallen again, even though a number of conventional indicators of vulnerability, for example in the form of fiscal imbalances and indebtedness, suggest that some members of the Eurozone remain vulnerable. Shocks in the form of the COVID-19 pandemic and the Ukraine war are likely to expose this vulnerability and increase the risks of there being another crisis. There are various scenarios in terms of the future of the Eurozone. These have different implications for the probability of there being a crisis. Another crisis remains a distinct possibility. Are markets assessing the risks appropriately, or is it that, having woken up following the last crisis, they may have gone back to sleep? Are they underestimating the risks of another Eurozone crisis?

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Modern Monetary Theory and the Policy Response to COVID-19

The COVID-19 pandemic has raised questions about the design of fiscal and monetary policy to assist economic recovery. Modern monetary theory (MMT) strongly argues in favour of substantial and fairly persistent fiscal expansion, claiming that there is neither a near-term capacity constraint, nor a financial one. MMT is, however, not particularly ‘modern’. Many of the basic ideas that it promulgates can be found in fairly standard neo-Keynesian analysis. Advocates of MMT unwisely downplay the potential problems associated with inflation, financial instability and the balance of payments. They also are too dismissive of central bank independence, which has played an important role in anchoring inflationary expectations. To argue in favour of fiscal and monetary expansion in the particular circumstances of the COVID-19 pandemic does not involve endorsing the full MMT approach to macroeconomic policy.

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The Epidemiology of Economic and Financial Crises

The COVID-19 crisis dramatically illustrates how viruses can rapidly spread across the globe with devastating effects. Increasing trade integration during the ‘first wave’ of globalisation provided a conduit through which economic disturbances could be transmitted between countries. The ‘second wave’ of globalisation involving closer international financial integration has created the potential for much more virulent transmission. This article analyses how the evolution of globalisation has affected the epidemiology of economic and financial crises, and takes the Eurozone crisis as a case study of cross-country contagion. The policy problems associated with the changing nature of transmission are also investigated.

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