Casper de Vries, Professor of Monetary Economics at Erasmus School of Economics, was invited to participate in the Economists’ Panel by BNR Newsradio (17 April 2023). The panel discussed the measures taken by central banks and the budgetary plans of the Dutch government.
Financial recession
Recently, the International Monetary Fund (IMF) estimated the probability of a financial recession to be 15%. This is mainly due to measures taken by central banks to counter the high inflation. De Vries notes that he is still optimistic if he looks at countries such as the Netherlands and the United States. However, he does acknowledge that the war in Europe and the consequent protectionist measurements have a negative impact on the economy. The Professor therefore underlines the importance of tight supervision by central banks on the solvability of financial institutions before central banks provide liquidity to financial institutions.
Budgetary policy
According to de Vries, the Dutch budgetary policy appears to be unsustainable. We are currently experiencing an output gap while the deficit and state debt is increasing. Hence, the Professor stimulates the government to phase out some of the subsidies. Due to the output gap we are in now, subsidies will only further ignite the inflation.
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For the full item by BNR Newsradio, 17 April 2023, click here.