Global economy

Rabah Arezki, Patrick Bolton, 21 April 2021

Ensuring that developing countries remain able to access credit markets is vital for promoting growth and recovery post-pandemic. This column argues that urgent efforts by major economies to support regional development banks and preserve their financial standing will help limit the cost of rebuilding after the crisis, in turn helping preserve international capital markets in the short and medium run.  

Avinash Persaud, 01 April 2021

The servicing and rolling over of the public and private debt of middle-income countries is a major point of COVID-19-induced stress in the global economy. The G20’s Debt Service Suspension Initiative is a worthy initiative, but it does not address this issue. This column outlines three related steps that may help avoid a crisis. The centre-piece is recycling new and unused Special Drawing Rights for debt reduction through the repayment or repurchase of debt. Moral hazard can be addressed by reducing only those debts held by official creditors and up to an amount equal to fiscal expenditures relating to natural disasters – COVID-19 and climate change, principal amongst them.  

Peter A.G. van Bergeijk, 18 March 2021

The COVID-19 pandemic is the first time in history that closing entire economies has been used as a medical tool, simultaneously and worldwide. This column argues that such ‘pandonomics’ cannot be repeated during future pandemics that are sure to come – the costs are too heavy. Since lockdowns are very costly, future economic non-pharmaceutical interventions need to be designed more intelligently, helping the economy to restructure and support the transition from a basically ignorant and domestically oriented society into a pandemic-aware one.

Gideon Bornstein, Per Krusell, Sérgio Rebelo, 01 March 2021

Oil markets have long been central to discussions of the global economy, and fluctuations in oil prices frequently gain widespread attention. This column explores the impact of the rising use of fracking on how oil markets are best conceived within modern macroeconomic theory. The author's model predicts that as fracking accounts for an increasingly sizeable fraction of the world oil supply, it may herald a new era of lower, more stable oil prices.

Natalia Martín Fuentes, Isabella Moder, 05 February 2021

The COVID-19 pandemic is an unprecedented shock to the global economy and its potential scarring effects are thus difficult to predict. This column presents estimates of the long-term impact of past crises, suggesting that past epidemics and other exogenous shocks did not cause scarring effects, while the negative impact of financial crises on the long-term level of potential growth tends to be persistent. However, unlike previous exogenous shocks, the COVID-19 pandemic could affect the supply side of the economy through several channels and thus lead to a permanently lower level of potential output.

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