"Sovereign Debt Crises," with Guido Lorenzoni, Northwestern University, on Monday, March 11, 4:10 PM-5:30 PM, 368A Heady Hall.

Guido Lorenzoni teaches macroeconomics at Northwestern University. His research focuses on the role of expectations in economic fluctuations and on the interaction between financial markets and aggregate economic activity. He holds a PhD from MIT. He is a research associate at the National Bureau of Economic Research and a foreign editor of the Review of Economic Studies.

Abstract: The paper surveys recent research on international financial crises. A financial crisis is characterized by a sudden, dramatic outflow of financial resources from an economy with an open capital account. This outflow may be primarily driven by the expectation of a large nominal devaluation, in a situation in which the domestic monetary-fiscal regime appears inconsistent with a fixed exchange rate. Or the outflow may be driven by a reallocation of funds by foreign and domestic investors, due to a changed perception in the country’s growth prospects, to an increase in the risk of domestic default, or to a shift in investors’ attitudes towards risk. Often times, monetary and financial elements are combined. A drop in domestic asset prices and in the real exchange rate can act as powerful amplifiers of the real effects of the crisis, through adverse balance-sheet adjustments. The paper surveys research that looks both at the monetary and at the financial side of crises, also discussing work that investigates the accumulation of imbalances preceding the crisis and the scope for preventive policies.

Ira W. “Duke” Arthur was born in Iowa in 1893. He graduated from Ames High School in 1912 as president of his senior class. He then attended Iowa State College where he studied animal husbandry. After graduating in 1916, he briefly taught animal husbandry at the University of Georgia. However, when war broke out he became a World War I flier with the United States Air Corps. After the war, he returned to Ames where he completed a Master’s Degree in Agricultural Economics in 1927. He continued his study of economics, first at the University of Chicago and then at the University of Minnesota, where he received his doctorate in 1939.

I.W. Arthur joined the Iowa State Economics Department in 1936. He became a full professor in 1959. His duties were divided between extension and teaching. His extension research and activities included contributions in the areas of farm leases, land tenure, social security, partnership agreements, pork and beef marketing, and rural human capital. However, his greatest contributions were in undergraduate teaching. His students admired him both for his kind, compassionate nature and for his straightforward, no- nonsense approach to economic problems.

The Department of Economics at Iowa State is proud to dedicate this seminar to the memory of I.W. Arthur and to the academic spirit that he strived to enhance.