May 25, 2018

Exogenous Shock?

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Lightning 14.07.2009 20-42-33

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There was a worrying macroeconomic development yesterday. Further to my post about the European and US Economies earlier this week, Slovakia has now voted down an expansion of the European Financial Stability Facility.

The proposed expansion (which has been approved by all other eurozone members) was intended to provide further lending facilities and the power to buy up government debt if required. As things stand now confidence in the single currency and the wider European banking system is likely to take a turn for the worse.

For those outside the eurozone this represents an exogenous shock. As you know from your study of Economics, exogenous shocks can have a major impact on the smooth running of any economy.

On a related note, we are in the middle of running the Economics on-campus seminars at the moment. Today participants will be taking the challenge of “Running the US Economy” through our simulation programme. It will be interesting to see how well they will deal with the exogenous shocks that we have concocted for them…