Global economy

Guenter W. Beck, Kai Carstensen, Jan-Oliver Menz, Richard Schnorrenberger, Elisabeth Wieland, 24 June 2022

Unprecedented events, including the Covid-19 pandemic and the Russian invasion of Ukraine, have boosted the demand for real-time measures of consumer price inflation. This column demonstrates the usefulness of high-frequency retail scanner data to document the dynamics of both prices and quantities of German food products in the aftermath of the invasion of Ukraine. Immediate price and quantity responses can be detected and quantified and their subsequent dynamics can be tracked on a continuous base. Both prices and quantities rose for oil and flour due to stockpiling behaviour by consumers, whereas only prices rose for other goods. 

Richard Baldwin, Dmitry Grozoubinski, 03 June 2022

Climate change, the pandemic, and persistent economic and social inequalities threaten untold millions of lives. While trade alone cannot solve these threats, this column argues that viable solutions require more trade, and stronger multilateral trade governance. This means that world leaders must reimagine the WTO as critical to saving lives, not just livelihoods – a vital tool in the struggle against humanity’s existential threats.

Luca Fornaro, Federica Romei, 27 May 2022

Since the start of the pandemic, global demand for tradable goods relative to non-tradable services has been exceptionally high. This column argues that this unusual demand pattern can push the global economy into stagflation, driven by scarcity of tradable goods. Countries running trade deficits export high inflation abroad, while policies that boost production of tradable goods and current account surpluses act as a benign disinflationary force. Due to a free riding problem, national monetary authorities may fall into a coordination trap leading to excessively high unemployment. High energy prices exacerbate all these effects. 

Jongrim Ha, M. Ayhan Kose, Franziska Ohnsorge, 30 March 2022

The recent commodity price surge, in the wake of Russia’s invasion of Ukraine, has exacerbated already elevated inflationary pressures. A new CEPR Policy Insight argues that over the medium term, as recent shocks unwind, inflation is expected to ease back towards targets, but the Great Inflation of the 1970s is a reminder of the material risks to this outlook. As inflation remains elevated, the risk is growing that, to bring inflation back to target, advanced economy central banks will once again need to undertake a much more forceful policy response than currently anticipated. 

Olivier Blanchard, Jean Tirole, 21 March 2022

A report generated by a commission of 24 distinguished economists focuses on three structural challenges for the global economy. The column sets out some of the conclusions. While the challenges of climate change, inequality and demographic change are significant, solutions – though sometimes expensive or unpalatable – exist.

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