Global economy

Demosthenes Ioannou, Maria Sole Pagliari, Livio Stracca, 18 September 2020

The debate over the incomplete and fragile nature of Europe’s Economic and Monetary Union has been revived by the Covid-19 pandemic. This column shows that adverse shocks within EMU can be identified and are transmitted to the rest of the world, with implications for economic activity and trade in advanced and emerging economies. Despite the important steps taken during the pandemic by euro area authorities, the drive to complete EMU with a genuine fiscal and financial union needs to continue for the sake of both the euro area and the rest of the world.

Benny Kleinman, Ernest Liu, Stephen Redding, 17 September 2020

The increasingly prominent role of China in the world economy has led to widespread discussions concerning the balance of power, trade relations, and economic development. This column presents a new ‘friends and enemies’ model which is used to show that significant growth and welfare effects have stemmed from China’s shifting role, and that changes in trading clusters have varied across different sectors. The findings also suggest that as countries become less economically friendly in terms of the welfare effects of their productivity growth, they also become less politically friendly in terms of foreign policy. 

Christopher Adam, Mark Henstridge, Stevan Lee, 08 September 2020

The small open economies of sub-Saharan Africa are substantially constrained in their ability to respond to the COVID-19 shock through fiscal adjustment. The scale of contraction in external demand, combined with limited fiscal space, means that without substantial external support, feasible policy packages in many of these countries translate to austerity programmes. This column uses a dynamic general equilibrium model calibrated to data from Uganda to characterise the macroeconomics of the pandemic and its aftermath in sub-Saharan Africa. It finds that the recovery depends significantly on how the public finances are restored to sustainability, and may be accelerated with external support.

Hiromitsu Goto, Yuji Fujita, Wataru Souma, 25 August 2020

The current economic crisis calls for a pandemic-resistant supply chain network in the post-COVID-19 era. This column investigates the Japanese supply chain network at the firm level and discusses its dynamics, resilience, and robustness. It shows that the network can be characterised by a ‘walnut’ structure, with an intricately connected centre surrounded by upstream and downstream components. Despite the maturity of the Japanese economy, the network is actively changing, with fast-growing firms becoming more connected and slow-growing firms moving to the periphery. Fully understanding this structure will be crucial in making supply chain networks resilient to pandemics in the future.

Eiichi Tomiura, Banri Ito, Byeongwoo Kang, 12 August 2020

Cross-border data flows are increasingly critical for modern firms, and the regulation of data poses a distinctly novel challenge for policymakers in the 21st century. This column presents survey data from Japan, investigating exactly which type of firm are most likely to be affected by regulations surrounding the international exchange of data. The results of the study suggest that new technologies such as Artificial Intelligence and 3D printers are usually adopted by the most productive and innovative firms, and that hampering these firms with regulation may create harmful effects for the wider economy.

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