Global economy

Hunter Clark, Maxim Pinkovskiy, Xavier Sala-i-Martin, 01 July 2017

Unofficial indicators of Chinese GDP often suggest that Beijing’s growth figures are exaggerated. This column uses nighttime light as a proxy to estimate Chinese GDP growth. Since 2012, the authors’ estimate is never appreciably lower, and is in many years higher, than the GDP growth rate reported in the official statistics. While not ruling out the risk of future turmoil, the analysis presents few immediate indications that Chinese growth is being systematically overestimated.

Daniel Gros, 30 June 2017

Trade liberalisation has been a significant driver of globalisation over the past half century, but global trade has slowed in recent years. This column argues that globalisation can also be driven by higher commodity prices, as commodities constitute a large fraction of global trade. This is reflected in trade volumes and commodity prices, which increased until around 2014 but have fallen since. Commodity price-driven globalisation implies lower living standards in advanced countries, as the higher commodity prices diminish the purchasing power of workers. 

Marc Auboin, Floriana Borino, 26 June 2017

In recent years there has been debate over whether the global trade slowdown and related fall in trade-to-income elasticity was structural or cyclical. This column estimates the standard import equation for 38 advanced and developing economies using an import intensity-adjusted measure of aggregate demand. This measure allows the authors to predict 90% of changes in global imports. The slowdown in global value chains explains more than half of the remaining share of the global trade slowdown, while protectionism does not appear to be statistically significant.

Charles R. Hulten, Leonard Nakamura, 02 June 2017

Conventional growth theory characterises innovation as ‘resource-saving’, in the sense that it allows the same output to be produced with fewer resources. This column introduces a sources-of-welfare growth model that also includes a measure of ‘output-saving’ innovation, which arises from the expanded scope and efficiency in consumer choice recently brought about by the Internet economy and smartphones. The findings highlight how various new kinds of intangible capital complicate the measurement of GDP.

Randolph Bruno, Nauro Campos, Saul Estrin, 25 May 2017

The economic effects of foreign direct investment are generally expected to be positive for the host economy. However, this is usually conditional on certain thresholds of development being met, for instance in terms of human capital or institutional quality. This column argues that the economic impact of foreign direct investment is less ‘conditional’ than commonly thought, perhaps because below the thresholds, the difference between private and social returns is substantial, while above them it is smaller.

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