Economic Diplomacy Initiative

In this week’s update on Covid-19 and Economic Diplomacy: Unemployment numbers were surprisingly positive, and the Federal Reserve continues its accommodative stance in response to the crisis. Germany unveils a fiscal stimulus to start the recovery with “a boom.” Challenges for emerging markets are growing, but turmoil in lending markets has abated for some countries.

The Economic Diplomacy Initiative is launching a weekly tracker featuring major developments in the global economic response to the COVID-19 crisis. This week: The U.S. withdraws from the WHO. What’s next for asset purchases at the world’s central banks? European fiscal policy emerges. And poverty and hunger crises join financial turbulence on the list of emerging market risks.

China piloted a national digital currency in April 2020. The European Central Bank has convened a working group of major economies to coordinate digital currency research and development. The U.S. Federal Reserve said it was in the early stages of researching the digital dollar. Spurred by the potential to modernize domestic payments systems, or take a leading role in updating the global payments infrastructure that supports cross-border trade and remittances, nations around the globe are exploring the merits and risks of issuing a digital currency. While many are in the early stages of research, central banks representing one-fifth of the world's population say they will issue a digital currency very soon.

The Belfer Center’s Economic Diplomacy Initiative, in collaboration with the Atlantic Council’s Global Business and Economics Program, is tracking the latest developments in central bank issued digital currencies.

The Fed’s response is directed toward achieving three goals: preventing financial markets from breaking down and magnifying the crisis; supporting domestic businesses through economic turbulence which could result in wide-spread bankruptcies; and ensuring that foreign central banks in major economies have access to dollar liquidity.

As European nations react to the spread of the novel coronavirus, leaders across Europe, from the European Central Bank, European Commission, and national governments, are deploying a host of policy tools to contain the economic fallout. 

The nine issue papers contained in this report were proposed and written by graduate students at the Belfer Center for Science and International Affairs at Harvard Kennedy School. They present fact-based, nonpartisan analysis to help focus the next Administration on the key policy debates that must be resolved. And, they aim to create a platform for our students to engage with the most pressing policy issues of the day as they continue their careers in public service.

Nicholas Burns: Facing Two Global Crises, We Need Thoughtful Leadership In Every Country

Digital currencies are on the rise. More than a decade after bitcoin made cryptocurrency mainstream, countries and central banks are evaluating whether to issue their own digital cash. The Belfer Center’s Economic Diplomacy Initiative (EDI) is exploring how policymakers should manage economic policy and the national security implications of this disruptive trend.

To illustrate the challenges posed by digital currency, EDI conducted a national security crisis simulation in Harvard Kennedy School’s JFK Jr. Forum. The simulation featured Harvard and MIT faculty and former government officials portraying National Security Council (NSC) members.

On November 19, 2019, the Belfer Center’s Economic Diplomacy Initiative hosted a national security crisis simulation in the JFK Jr. Forum to a packed audience from the Harvard and MIT communities. 

Drawing on the experience of Belfer Center members who have served in the highest levels of the U.S. government, the event explored the nexus of U.S. economic power and its national security interests.

Aditi Kumar is Executive Director of the Belfer Center. Prior to joining the Center, she was a Principal at Oliver Wyman in the financial services and public policy practices, and earlier was a project manager at the World Economic Forum. A joint graduate of Harvard Kennedy School and Harvard Business School, she also worked previously in the International Affairs office of the U.S. Department of the Treasury.