Jens Weidmann: The potential long-term effects of the coronavirus crisis on the economy and on monetary policy

Speech by Dr Jens Weidmann, President of the Deutsche Bundesbank and Chair of the Board of Directors of the Bank for International Settlements, at the Humboldt University of Berlin, virtual event, 16 December 2020.

The views expressed in this speech are those of the speaker and not the view of the BIS.

1 Introduction

Ladies and gentlemen,

I would have been more than delighted to have delivered this speech – as was originally planned – in the historical Chapel of the Holy Ghost in Berlin. Unfortunately, that plan – like so many others – has been thwarted by the pandemic. But I am glad that we can exchange views today at least in a virtual format.

The Wirtschaftswissenschaftliche Gesellschaft, the society of the School of Business and Economics at the Humboldt University, is celebrating its 25th anniversary this year. And I would like to heartily congratulate its members to mark this occasion. At the beginning of the society, one founding member was a prominent Bundesbanker, namely Helmut Schlesinger. He was President of the Deutsche Bundesbank from 1991 to 1993 and, before that, he had held numerous posts at the Bank and its predecessor institution, the Bank deutscher Länder, over a period of almost four decades here in Frankfurt.

Another distinguished person who belonged to the society and its Board of Trustees was Professor Reinhard Selten. So far, he is the only German who has been awarded the Nobel prize in economics, which was for his work on game theory. Reinhard Selten studied in Frankfurt and then began his first full professorship teaching in Berlin. Four years later, I attended his lectures on game theory in Bonn and earned a little extra money taking part in the institution's experiments.

In my speech today, I would like not only to build a bridge from Frankfurt to Berlin but also a bridge linking game theory to monetary policy. One well-known example of game theory is the "chicken game". Perhaps you know it from the film "Rebel Without a Cause"? Jim, played by James Dean, and another teenager, Buzz, are racing in stolen cars towards a cliff; whoever jumps out first is chicken.

Fortunately, most economic games are less dangerous for life and limb.