Richard Samans, 06 March 2018

Recent political developments in many countries suggest that most of their citizens lack confidence in the assumption of the standard growth model that everyone in a society benefits from GDP growth. This column proposes a multidimensional 'Inclusive Development Index', based on a dashboard of indicators in growth and development, inclusion, and intergenerational equity and sustainability. GDP per capita growth is weakly correlated with performance in many of the new index’s indicators, including those pertaining to employment, income and wealth inequality, and carbon intensity.

Marco Buti, Björn Döhring, José Leandro, 08 February 2018

The outlook for the euro area economy depends to a large extent on whether the impact of the crisis will turn out to be permanent or transitory. This column attempts to chart out the path ahead, starting from what different narratives of the 'atypical recovery' imply about the further trajectory of GDP and inflation. In view of remaining slack, and barring an exogenous shock or policy mistakes, there is scope for solid GDP growth above potential for some time. The factors that should eventually drive an increase in core inflation are gaining force, but only gradually.  The current supportive policy mix is thus appropriate for the euro area as a whole, but reforms that raise productivity and increase the economy's resilience to shocks should be accelerated.

Christian Ebeke, Kodjovi Eklou, 19 January 2018

The economics profession has generally explained large movements in macroeconomic aggregates such as GDP or employment by shocks to other aggregates. This is in part due to the difficulty of translating micro or localised shocks into macro-relevant ‘news’. This column argues that idiosyncratic shocks at the biggest European firms are behind 40% percent of aggregate GDP fluctuations in Europe. These results have implications for the effectiveness of traditional demand-side policies in the fine-tuning of granular economies.

Benjamin Born, Gernot Müller, Moritz Schularick, Petr Sedláček, 28 November 2017

It is hard to calculate the current cost of Brexit, because there is no obvious counterfactual. This column calculates the cost by letting a matching algorithm determine which combination of comparison economies best resembles the pre-referendum growth path of the UK economy. The difference in output between the UK economy and its synthetic doppelganger adds up to a loss of 1.3% of GDP, or close to £300 million per week, since the vote took place. This implies a cumulative cost of more than £60 billion by the end of 2018.

Hylke Vandenbussche, William Connell, Wouter Simons, 27 November 2017

Global value networks make it difficult to evaluate the trade impact of Brexit. Using a new model of trade that accounts for the indirect effect of these networks, this column delivers fresh bad news for the UK, and for the rest of Europe. Brexit cuts GDP more, and costs more jobs, if we also consider global value chains. A hard Brexit would destroy four times as much GDP, and four times as many jobs throughout Europe, as a soft Brexit.

Olivier Coibion, Yuriy Gorodnichenko, Mauricio Ulate, 24 August 2017

Estimates of potential output around the world have been systematically revised downward since the Great Recession. This column argues that the methods used to create these estimates do not distinguish between transitory and permanent shocks, or demand and supply shocks. Taking these differences into account suggests US output is almost 10 percentage points below potential output. This has important immediate implications for policymakers, and raises questions for those who estimate potential output.

Maarten de Ridder, Coen Teulings, 13 July 2017

Around the world, growth has yet to recover to its pre-Global Crisis trend. This column uses the crisis as a quasi-natural experiment to test the endogenous growth hypothesis, which suggests that output has not recovered because the crisis affected the rate of technological progress. Firms that preferred a bank that was more severely affected by the crisis experienced a large fall in R&D investment and a persistent fall in output in subsequent years. This suggests a direct link between R&D and future productivity, as predicted by endogenous growth models.

Willem Thorbecke, Atsuyuki Kato, 01 July 2017

Since 2007, there have been large changes in the Swiss franc. This column shows that exchange-rate appreciations do not affect the exports, profits, or stock returns of Swiss companies making sophisticated products. In contrast, rises in the franc decrease the exports, profits and stock returns of firms producing medium-high-technology goods. An economy’s production structure is important for weathering exchange-rate fluctuations.

Neil Ericsson, 08 June 2017

Decisions by the Fed's Federal Open Market Committee are based in part on the Greenbook forecasts. These forecasts are produced by the Federal Reserve Board’s staff and are presented to the FOMC prior to their policy meetings, but are not made public for another five years. This column shows that the minutes of those FOMC meetings can help infer the Fed staff's Greenbook forecasts of the US real GDP growth rate, years before the Greenbook's public release. The FOMC minutes are thus highly informative about a key input to monetary policymaking.

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.

Joshua Aizenman, Yothin Jinjarak, Jungsuk Kim, Donghyun Park, 08 January 2016

Peter Chen, Loukas Karabarbounis, Brent Neiman, 05 April 2017

Corporate saving has increased relative to GDP and corporate investment across the world over the past three decades, reflecting how the global decline in the labour has led to increased corporate profits. This column characterises these trends using national income accounts and firm-level data, and relates them to firm characteristics and the accumulation of financial assets. In response to declines in the components of the cost of capital, a model with capital market imperfections generates an increase in corporate saving similar to that found in the data.

Jonathan Portes, Giuseppe Forte, 05 January 2017

The various projections of the impact of Brexit on the UK economy that were produced during the referendum campaign omitted the economic impact of changes in migration to the UK. This column presents plausible scenarios for future migration flows and estimates of the likely impacts. The potential negative impact of Brexit-induced reductions in openness to migration on the UK economy could well equal that resulting from Brexit-induced reductions in trade.

Kristin Forbes, Dennis Reinhardt, Tomasz Wieladek, 23 December 2016

Globalisation is in retreat, but while the slowdown in trade is widely recognised, what is more striking is the collapse of global capital flows. This column shows how banking deglobalisation is a substantial contributor to the sharp slowdown in global capital flows. It finds that certain types of unconventional monetary policy, and their interactions with regulatory policy, can have important global spillovers. Policies designed to support domestic lending may have had the unintended consequence of amplifying the impact of microprudential capital requirements on external lending.

Leandro Prados de la Escosura, 21 December 2016

A new set of historical national accounts for Spain constructs estimates of output and expenditure from 1850 onwards, which means we can estimate the evolution of GDP per capita and labour productivity during this period. This column argues that the data demonstrates that GDP per capita captures long-run trends in welfare in Spain, but not short and medium run trends.

Antonio Fatás, Lawrence H. Summers, 12 October 2016

Conventional wisdom on supply and demand suggests that demand shocks are cyclical or transitory, and that only technology shocks are responsible for trend changes. This column argues that cyclical events can have permanent effects on demand, and therefore GDP. It is time for policymakers to start considering the possibility of hysteresis seriously.

Brock Smith, Thomas McGregor, Samuel Wills, 28 August 2016

One of the biggest challenges in fighting poverty is to know where it is. This column describes a new way to measure poverty by using satellites to count people who live in darkness at night. This shows that the economic benefits of oil booms don’t trickle down to the very poor.

Maxim Pinkovskiy, Xavier Sala-i-Martin, 26 June 2016

When it comes to measuring GDP, researchers tend to use the latest vintage of the Penn World Tables. However, competing series like the World Development Indicators (WDI) and changing methodologies between vintages mean this is not necessarily the best approach. This column assesses the relative performance of different GDP estimators using night-time lights as an unbiased predictor of the growth rates of unobserved true income. Newer versions of the Penn Tables are not necessarily improvements on their direct predecessors.  Newer versions of the WDI index, especially the 2011 vintage, appear generally better at measuring cross-country income differences.

Diane Coyle, 08 February 2016

Digital technologies are having dramatic impacts on consumers, businesses, and markets. These developments have reignited the debate over the definition and measurement of common economic statistics such as GDP. This column examines the measurement challenges posed by digital innovation on the economic landscape. It shows how existing approaches are unable to capture certain elements of the consumer surplus created by digital innovation. It further demonstrates how they can misrepresent market-level shifts, leading to false assessments of production and growth.

Joshua Aizenman, Yothin Jinjarak, Jungsuk Kim, Donghyun Park, 08 January 2016

Taxation in developing nations has always been difficult, but the Global Crisis has brought further complications. This column examines and compares the tax revenue trends in Asia and Latin America to shed light on some of these issues. Despite their similarities, there is no one-size-fits-all explanation for tax/GDP ratios between the two regions. While progress has been made, the gap between the advanced economies and developing countries offers ample room for improvement. This is particularly important for developing nations as they face growing demand for fiscal spending.

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