Vítor Constâncio: Laudatio for Professor Kenneth Rogoff, recipient of the 2011 Deutsche Bank Prize in Financial Economics Speech by Mr Vítor Constâncio, Vice-President of the European Central Bank, at the Laudatio for Professor Kenneth Rogoff, recipient of the 2011 Deutsche Bank Prize in Financial Economics, Frankfurt am Main, 22 September 2011. *  *  *  Ladies and Gentlemen, It is a great pleasure to address a few words to mark the awarding of the 2011 Deutsche Bank Prize in Financial Economics to Professor Kenneth Rogoff of Harvard University. I will recall some of Professor Rogoff’s outstanding contributions to economics and financial economics, and I will also comment on some of his research in the context of the responses to the current crisis. Let me first emphasise that research plays a crucial role for the Eurosystem – just as it does for other central banks. Indeed, research has provided an essential input to the definition of the ECB’s price-stability monetary policy strategy. I would thus like to express my appreciation to Professor Rogoff for the influential contributions he has made in many fields of special relevance to central bank policymakers, ranging from monetary policy to international finance and financial crises. He merits particular praise for helping us to improve our understanding of some of the main causes and mechanisms behind the links between financial crises and sovereign debt crises.
As I said at the start, in the second part of my address I will talk about our main macroeconomic and monetary policy considerations during the coronavirus crisis. From a purely technical perspective, this crisis has been fascinating and inspiring. It also took us completely by surprise. Its main feature is that it was a typical exogenous shock: it hit the economy from the “outside”. 5/7  BIS central bankers' speeches  The GFC was caused by endogenous economic processes linked with huge levels of subprime lending, widening imbalances and unprecedentedly high risks building up in the financial sector, whereas the coronavirus pandemic is more like the plagues of Egypt. It has often been said that this crisis has drawn a sharp dividing line between the sectors and industries which have profited unexpectedly and sometimes even wildly from it, and those which have been hit extremely hard or even wiped out by it. Unlike typical cyclical crises, which tend to have a synchronised effect on most industries, this crisis is characterised by contrasting impacts. This feature has manifested itself in relatively smooth flows of employees between industries, so structural unemployment has stayed quite low. I should add, though, that strongly expansionary fiscal policy has been a major mitigating factor. At the price of sharply rising public debt, fiscal expansion has made it easier for the private sector to adjust structurally at the microeconomic level.