Question A:
Credible assumptions for
inflation, GDP growth and primary budget deficits in Italy imply that either
the Debt-to-GDP ratio in Italy would increase sharply if Italian
interest rates on 10-year government debt remained at the November 30
level of around 7 percent or Italy would lose access to the bond
market.
Responses
Responses weighted by each expert's confidence
Question B:
Absent outside help to deal
with runs, such as a pledge of fiscal support from Germany or an unlimited
commitment by the ECB to buy bonds, there is no spending-and-tax plan
Italy can announce that would be credible enough
to hold its interest rates low enough to stabilize its
Debt-to-GDP ratio.
Responses
Responses weighted by each expert's confidence
Question A Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
 Daron Acemoglu |
MIT | Bio/Vote History | ||
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The question presumes that there is no possibility of debt restructuring that could keep debt to GDP stable and grant access to bond markets
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 Alberto Alesina |
Harvard | Bio/Vote History | ||
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these rates are unsutainable but a program of deep structural reforms and budget tightening could reestablish credibilty of reduce spreads
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 Joseph Altonji |
Yale | Did Not Answer | Bio/Vote History | |
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 Alan Auerbach |
Berkeley | Bio/Vote History | ||
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 David Autor |
MIT | Bio/Vote History | ||
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 Katherine Baicker |
University of Chicago | Bio/Vote History | ||
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 Marianne Bertrand |
Chicago | Bio/Vote History | ||
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 Raj Chetty |
Harvard | Did Not Answer | Bio/Vote History | |
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 Judith Chevalier |
Yale | Bio/Vote History | ||
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This is not really my area, though I nonetheless understand the question to be roughly true.
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 Janet Currie |
Princeton | Bio/Vote History | ||
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 David Cutler |
Harvard | Bio/Vote History | ||
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 Angus Deaton |
Princeton | Bio/Vote History | ||
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 Darrell Duffie |
Stanford | Bio/Vote History | ||
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Not necessarily "sharply" in time, but significantly over time, yes, absent some other big structural shift.
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 Aaron Edlin |
Berkeley | Bio/Vote History | ||
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Italy as a problem likely to get worse before it gets better.
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 Barry Eichengreen |
Berkeley | Bio/Vote History | ||
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 Ray Fair |
Yale | Bio/Vote History | ||
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This question is too confusing to answer.
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 Pinelopi Goldberg |
Yale | Bio/Vote History | ||
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 Claudia Goldin |
Harvard | Bio/Vote History | ||
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 Austan Goolsbee |
Chicago | Bio/Vote History | ||
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not good. not good.
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 Michael Greenstone |
University of Chicago | Did Not Answer | Bio/Vote History | |
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 Robert Hall |
Stanford | Bio/Vote History | ||
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Zero real GDP growth and huge outstanding debt make the deficit growth high even though Italy has a small primary surplus.
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 Bengt Holmström |
MIT | Bio/Vote History | ||
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 Caroline Hoxby |
Stanford | Bio/Vote History | ||
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At those interest rates, Italy's interest payments will become an ever increasing share of its govt budget, under any plausible tax scenario
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 Kenneth Judd |
Stanford | Bio/Vote History | ||
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 Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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Basic arithmetic of debt dynamics shows that this constellation cannot persist.
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 Pete Klenow |
Stanford | Bio/Vote History | ||
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Debt 120%, deficit 4%, growth 4% (nominal) --> ratio falling. Higher rates (say pushing the deficit on a path toward 8%) --> ratio rising.
-see background information here -see background information here -see background information here -see background information here -see background information here |
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 Edward Lazear |
Stanford | Did Not Answer | Bio/Vote History | |
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 Jonathan Levin |
Stanford | Bio/Vote History | ||
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Not sure about "sharply" but seems hard to lower debt-to-GDP at those interest rates without better growth prospects.
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 William Nordhaus |
Yale | Bio/Vote History | ||
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 Maurice Obstfeld |
Berkeley | Bio/Vote History | ||
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Hard to imagine any feasible austerity plan that would work at 7% or more, given the negative effect on real GDP growth and inflation.
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 Cecilia Rouse |
Princeton | Bio/Vote History | ||
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 Emmanuel Saez |
Berkeley | Bio/Vote History | ||
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 José Scheinkman |
Columbia University | Did Not Answer | Bio/Vote History | |
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 Richard Schmalensee |
MIT | Bio/Vote History | ||
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Simply have not done the necessary quantitative work.
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 Hyun Song Shin |
Princeton | Bio/Vote History | ||
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 James Stock |
Harvard | Did Not Answer | Bio/Vote History | |
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 Nancy Stokey |
University of Chicago | Bio/Vote History | ||
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 Richard Thaler |
Chicago Booth | Bio/Vote History | ||
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 Christopher Udry |
Northwestern | Bio/Vote History | ||
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 Luigi Zingales |
Chicago Booth | Bio/Vote History | ||
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Question B Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
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Daron Acemoglu |
MIT | Bio/Vote History | ||
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This question again rules out the possibility of debt restructuring. Also not clear that effective ECB commitments must be unlimited.
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Alberto Alesina |
Harvard | Bio/Vote History | ||
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italy needs deep domestic refroms and a solution of the eurpoean French-German impasse on the role of the ECB
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Joseph Altonji |
Yale | Did Not Answer | Bio/Vote History | |
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Alan Auerbach |
Berkeley | Bio/Vote History | ||
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David Autor |
MIT | Bio/Vote History | ||
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Katherine Baicker |
University of Chicago | Bio/Vote History | ||
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Marianne Bertrand |
Chicago | Bio/Vote History | ||
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Raj Chetty |
Harvard | Did Not Answer | Bio/Vote History | |
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Judith Chevalier |
Yale | Bio/Vote History | ||
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Again, this is definitely not my area, and I might have preferred the question to include a "likely", but I believe it is likely to be true.
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Janet Currie |
Princeton | Bio/Vote History | ||
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David Cutler |
Harvard | Bio/Vote History | ||
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Angus Deaton |
Princeton | Bio/Vote History | ||
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Darrell Duffie |
Stanford | Bio/Vote History | ||
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I am pessimistic, absent outside help, but this is a strong statement that Italy has no way at all to do it on its own. I'm uncertain.
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Aaron Edlin |
Berkeley | Bio/Vote History | ||
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Something big by way of a guarantee is the surest way to stability of italian bonds.
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Barry Eichengreen |
Berkeley | Bio/Vote History | ||
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Ray Fair |
Yale | Bio/Vote History | ||
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Hard to know what others would take as credible. Really a psychological question.
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Pinelopi Goldberg |
Yale | Bio/Vote History | ||
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Claudia Goldin |
Harvard | Bio/Vote History | ||
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Austan Goolsbee |
Chicago | Bio/Vote History | ||
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without growth, all the austerity you can muster will not solve the problem
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Michael Greenstone |
University of Chicago | Did Not Answer | Bio/Vote History | |
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Robert Hall |
Stanford | Bio/Vote History | ||
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This is a question about Italian politics where I'm no expert, but progress so far in lowering real wages and improving TFP has been small.
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Bengt Holmström |
MIT | Bio/Vote History | ||
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Stabilization requires short-term outside liquidity support, a credible long-term fiscal plan along with lower interest rates. Go together.
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Caroline Hoxby |
Stanford | Bio/Vote History | ||
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A political economy question on the spending side! (The tax side is fairly clear.) It fits my knowledge of Italy's ability to cut spending
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Kenneth Judd |
Stanford | Bio/Vote History | ||
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Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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Hard call, you can't say the country is insolvent -- but how will Italy roll all of its debt if there is no outside support?
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Pete Klenow |
Stanford | Bio/Vote History | ||
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Edward Lazear |
Stanford | Did Not Answer | Bio/Vote History | |
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Jonathan Levin |
Stanford | Bio/Vote History | ||
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William Nordhaus |
Yale | Bio/Vote History | ||
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Maurice Obstfeld |
Berkeley | Bio/Vote History | ||
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Credibility is the key, so "outside help" to keep borrowing cost down would be a critical element in success of any austerity plan.
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Cecilia Rouse |
Princeton | Bio/Vote History | ||
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Emmanuel Saez |
Berkeley | Bio/Vote History | ||
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José Scheinkman |
Columbia University | Did Not Answer | Bio/Vote History | |
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Richard Schmalensee |
MIT | Bio/Vote History | ||
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Simply have not done the necessary quantitative work.
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Hyun Song Shin |
Princeton | Bio/Vote History | ||
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James Stock |
Harvard | Did Not Answer | Bio/Vote History | |
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Nancy Stokey |
University of Chicago | Bio/Vote History | ||
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Modest spending cuts, together with substantial regulatory reform, would probably solve the problem.
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Richard Thaler |
Chicago Booth | Bio/Vote History | ||
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Above my pay grade.
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Christopher Udry |
Northwestern | Bio/Vote History | ||
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Luigi Zingales |
Chicago Booth | Bio/Vote History | ||
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