Javier Bianchi, Senior Economist at the Minneapolis Federal Reserve, presented his paper Rollover Crises and Monetary Independence at the 7th NCID Research Workshop last Friday 18th of May at the Fundación Ramón Areces in Madrid. 

Financial crisis have an important role in the possibility of generating a rollover crisis, as governments are tempted to default because lenders are not willing to rollover short term debt.

“When a country gives up its monetary independence, because it joins the euro or fixes the exchange rate, it is going to become much more vulnerable to a rollover crisis”, Bianchi said. “This is important and explains why countries such as Portugal and Spain suffer from such high spread despite their debt to GDP where not as high as other economies like UK or Japan. Having monetary autonomy can be helpful when investors ran”, he concluded.