Global economy

Christine Arriola, Przemyslaw Kowalski, Frank van Tongeren, 15 November 2020

The Covid-19 pandemic has left in its wake a global economy damaged beyond what was thought possible a decade ago. The globalised nature of the 21st century global economy is a key component in terms of the dynamics, and effects, of the virus. This column presents an analysis of the importance of global value chains, both during the pandemic and throughout the recovery process. The results of the study suggest that increased localisation could do more harm than good, and that the international network of interconnected supply chains remains key to producing essential goods and services.

Margareta Drzeniek, Sheana Tambourgi, Ilaria Marchese, 12 November 2020

COVID-19 is accelerating structural transformations, notably towards more digitalised and more automated economies. This column presents a COVID-19 economic recovery index which considers the extent to which a country is exposed to major health effects from COVID-19, the degree to which a country’s economy will be affected by the crisis, and a country’s capacity to recover and rebuild to pre-COVID-19 levels. To guide their economies out of this crisis and to ready them for the coming transformation, governments need to restore trade flows, manage the risks of slowing global economic convergence, and actively prepare for accelerating economic transformation.

Alexander Chudik, Kamiar Mohaddes, M. Hashem Pesaran, Mehdi Raissi, Alessandro Rebucci, 19 October 2020

The Covid-19 pandemic is unprecedented in its global reach and impact, posing formidable challenges to policymakers and to the empirical analysis of its direct and indirect effects within the interconnected global economy. This column uses a ‘threshold-augmented multi-country econometric model’ to help quantify the impact of the Covid-19 shock along several dimensions. The results of the analysis show that the global recession will be long lasting, with no country escaping its impact regardless of their mitigation strategy. These findings call for a coordinated multi-country policy response to the pandemic.

Paul De Grauwe, Yuemei Ji, 24 September 2020

The coronavirus pandemic caused a catastrophic collapse in the world economy. This column analyses the path of this decline and compares it to two other major global crises: the Great Depression in the 1930s and the Great Recession following the banking crisis of 2007-2008. It argues that COVID-19 led to both negative demand and supply shocks, resulting in a contraction of industrial production at an unprecedented pace. However, a combination of strong government policies and a functioning banking sector have led to a swifter rebound in economic activity following the coronavirus shock in comparison with the previous two crises.

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.

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