The ‘great inventions’ view of productivity growth ascribes the excellent growth from 1920 to 1970 in the US to a handful of advances, and suggests that today poor productivity performance is driven by a lack of breakthrough discoveries. This column argues instead that the development of an effective governmental infrastructure in the 19th century accounted for a major part of US technological progress and prominence in this period. Infrastructure design thus appears to have the power to reinvigorate technological progress.
The business of central banks used to be profitable – they issued cash and could invest the proceeds in the assets they liked. This column argues that the ECB has turned the old business model of central banks around. Today, it earns a stream of income on its liabilities, while the returns of an increasing part of its assets go to the national central banks. This cannot be a stable arrangement.
Investor demand for bonds is very high. This column argues that this is surprising because under almost any likely inflation scenario, including central banks merely hitting their target inflation rates, bondholders suffer large losses. The beneficiaries are sovereign and corporate borrowers; the losers are pension funds, insurance companies and some foreign exchange reserve funds. Meanwhile, the systemic risk from a bond crisis is increasing.
When it comes to measuring GDP, researchers tend to use the latest vintage of the Penn World Tables. However, competing series like the World Development Indicators (WDI) and changing methodologies between vintages mean this is not necessarily the best approach. This column assesses the relative performance of different GDP estimators using night-time lights as an unbiased predictor of the growth rates of unobserved true income. Newer versions of the Penn Tables are not necessarily improvements on their direct predecessors. Newer versions of the WDI index, especially the 2011 vintage, appear generally better at measuring cross-country income differences.
Britain voted to leave the EU. This is terrible news for the UK, but it is also bad news for the Eurozone. Brexit opens the door to all sorts of shocks, and dangerous political snowball effects. Now is the time to shore up the Eurozone’s resiliency. The situation is not yet dire, but prompt action is needed. This VoxEU column – which is signed by a wide range of leading economists – identifies what needs to be done soon, and what should also be done but can probably wait if markets are patient.
Other Recent Columns:
- An early assessment of the Single Supervisory Mechanism
- On the financial market consequences of Brexit
- Credit effects of shocks to bank balance-sheets: New Italian data
- Future of the renminbi: Lessons from the past decades
- On East Asia’s financial future
- Factoryless goods producers in Japan
- Inequality in Germany: How it differs from the US
- Quality schools can boost boys’ achievement
- Deconstructing deindustrialisation
- Why China was on the wrong side of the Great Divergence
- Why General Electric is localising production
- Marriage prospects of skilled and unskilled women: New evidence
- Panama Papers and bank secrecy: Impact of blacklisting
- Brexit and EU power distribution
- CFM Survey June 2016: Brexit and the City
- Social media and corruption
- Analysing market responses
- Competition policy and inclusive growth
- Impact of the US Civil War on southern wealth holders
- The pound and the macroeconomic effects of Brexit