Kieran Mc Morrow , François Blondeau, Francesca D’Auria, Björn Döhring, Atanas Hristov, Christoph Maier, Anna Thum-Thysen, 10 December 2021

Strong policy actions have dampened the impact of Covid-19 on workers and businesses. Amid a rapid recovery, dents to potential output are set to remain limited and transitory. But many uncertainties persist and some economic scarring from the pandemic may only emerge over the coming years. This column summarises the insights from a recent conference on the implications of the Covid-19 recession for the EU’s growth potential. 

Heli Simola, 24 November 2021

The collapse of global trade during the COVID-19 crisis was stunning in its magnitude, but was milder in relative terms than during the Global Crisis. Based on data from 40 different countries, this column suggests that the key lies in the composition of demand. The contributions of consumption and services sector demand to the import contraction were notably larger during the COVID-19 crisis. This may have led to a relatively milder import contraction, as consumption and services production are less import-intensive than investment and manufacturing production.

Sean Dougherty, Pietrangelo de Biase, 26 October 2021

Following the global financial crisis, subnational governments engaged in pro-cyclical fiscal policy by reducing investment, drawing out the recovery. This column presents evidence suggesting that the Covid crisis has impacted the fiscal positions of subnational governments in the OECD far less than the previous crisis, which should mitigate this tendency towards pro-cyclicality. This is partly the result of central governments having provided substantial fiscal support, while at the same time subnational governments have relied heavily on relatively stable revenues from recurrent taxes on immovable property which, unlike in the previous crisis, are not expected to decline due to a housing market crash.

Alex Bryson, David Blanchflower, 21 October 2021

Economic downturns are not as unpredictable as we once thought. There is mounting evidence that the expectations of consumers, workers and employers predict economic downturns, sometimes 12 to 18 months ahead. But we live in exceptional times. The COVID-19 pandemic and its aftermath have sown doubt and uncertainty among consumers and producers and may do so for some time to come. So what’s the economic prognosis? this column argues that expectations data for the US suggest the country is entering recession about now.

Mario Monti, 19 October 2021

In a video recorded in 2017, Mario Monti looks back at the challenges posed by the Global Crisis, 10 years earlier, and asks how well prepared for the next crisis the world is.

Post-Covid, his words regarding growing differences in ideological viewpoints between the EU and the US, as well as the possible effects on the unity of any EU response likely to be posed by Brexit seem prophetic.

Mirco Balatti, Juan Carluccio, Francesco Chiacchio, Nuno Coimbra, Susana Parraga, Daniele Siena, Sebastian Stumpner, Fabrizio Venditti, Tina Žumer, 11 October 2021

Since the start of the pandemic, inflation has re-entered mainstream discussion. This column reviews the analysis of globalisation and inflation conducted in the context of the ECB strategy review. Although global factors (mainly commodity prices) matter for inflation synchronisation, their role in lowering both inflation and its sensitivity to the business cycle in advanced economies has been limited since the late 1980s. Global shocks can exert temporary pressure on price dynamics, but the destiny of inflation remains in the hands of central banks.

Sulkhan Chavleishvili, Stephan Fahr, Manfred Kremer, Simone Manganelli, Bernd Schwaab, 05 October 2021

When managing financial imbalances, macroprudential policymakers face an intertemporal trade-off between facilitating short-term expected growth and containing medium-term downside risks to the economy. To help assess this trade-off, this column proposes a risk management framework which extends the well-known notion of growth-at-risk to consider the entire predictive real GDP growth distribution. The authors use a novel empirical model fitted to euro area data to study the direct and indirect interactions between financial vulnerabilities, financial stress, and real GDP growth, highlighting a number of key findings.

Armand Fouejieu, Alvar Kangur, Samuel Romero Martinez, Mauricio Soto, 02 October 2021

The past three decades have witnessed reform efforts to contain pension expenditures, the cost of which is born mostly by younger generations. This column assesses the sustainability, fairness, and intergenerational equity of pension systems in Europe by comparing the pension contributions and benefits over the lifetime of different cohorts. Reforms legislated in the decade from the onset of the Global Crisis reduced the lifetime benefit-contribution ratio by nearly 25% for younger generations. However, subsequent policy reversals have partly eroded these gains, suggesting additional reforms are needed.

Ruo Shangguan, Jed DeVaro, Hideo Owan, 18 September 2021

It has been argued that when workers are already working long weeks, adding more hours can reduce productivity. This column tests this argument using evidence from Japan. The authors find that long working hours of key team members harm team productivity. In contrast, shorter hours cause the opposite effect, perhaps because workers recover from fatigue and arrive for work with increased energy and focus.

John Duca, John Muellbauer, Anthony Murphy, 13 September 2021

Research on house price cycles and their interactions with the economy has burgeoned since the Global Financial Crisis. This column draws five lessons from a recent comprehensive survey. It argues that conventional theories of house price dynamics are misleading. Shifts in credit conditions, together with differences in housing supply response across cities, regions and countries, account for much of the heterogeneity of house price outcomes. Finally, increased demand for space and unprecedented policy interventions together explain the very different house price experience in the pandemic compared with the Global Financial Crisis.

Philipp F. M. Baumann, Enzo Rossi, Alexander Volkmann, 20 August 2021

After bouts in the 1970s and 1980s, consumer price inflation has been trending downward since the 1990s. Recently, voices fearing a pick-up in inflation have become more numerous and louder. This column describes the main forces acting on inflation in 122 countries over the last two decades, with the aim of informing the current debate. While energy prices act strongly on inflation, factors such as central bank independence or inflation targeting have little explanatory power.

Damien Puy, Lukasz Rawdanowicz, 22 June 2021

The Covid-19 crisis has had a largely negative effect on firms, harming corporate profitability and leverage around the world. This column presents findings from the recent OECD Economic Outlook, highlighting how these negative effects have in fact varied across firms. In maintaining the buffer against corporate bankruptcies, the authors identify three clear policy challenges: debt overhang, financial instability, and the rise of ‘zombie’ firms.

Cathérine Casanova, Beatrice Scheubel, Livio Stracca, 04 June 2021

Since the Global Crisis, the channels of capital flows have changed significantly. This column analyses key trends and underlying drivers of capital flows since the Global Crisis, including the policy trade-offs. It documents the increasing importance of market-based funding, a growing reliance on domestic currency liabilities, and a less stable foreign direct investment environment, particularly for emerging market economies. Although these changes create risks which should be managed, capital flows also present clear benefits for stimulating economic performance and efficiency. 

Ian Goldin, Pantelis Koutroumpis, François Lafond, Julian Winkler, 31 May 2021

Labour productivity is a key determinant in improving living standards. But in recent years, productivity has stagnated, if not declined, in many countries around the world. This column re-evaluates the various reasons as to why this might be, applying three criteria to the existing explanations for the slowdown. It finds that the slowdown in productivity can be attributed to numerous factors, ranging from mismeasurement to changes in trade patterns.

Assaf Razin, 23 April 2021

Concerns associated with the Covid-19 pandemic have led to new rationales of protectionism, with renewed emphasis on domestic production and sourcing. This column compares the current economic crisis brought on by the pandemic to previous major economic crises and examines what this could mean for the future of various aspects of globalisation.

Stefano Corradin, Marie Hoerova, Glenn Schepens, 12 February 2021

Euro area money markets have gone through substantial changes and turbulent periods over the past 15 years. These have included the global and euro area sovereign debt crises, new liquidity and leverage requirements, and the expansion of the Eurosystem balance sheet through asset purchase programmes. This column discusses the interaction between money markets, new Basel III regulations, and central bank policies. The analysis shows that money market conditions worsen when financial stress increases, or if central bank asset purchases induce scarcity effects. It outlines implications of changing money market conditions for monetary policy implementation and transmission.

Hans Degryse, Mike Mariathasan, Thi Hien Tang, 29 January 2021

Frequent bailouts during the Global Crisis showed that governments cannot credibly commit not to support large financial institutions. This inability leads to moral hazard and motivated the Financial Stability Board’s framework for ‘global systemically important banks’. This column explores the net effects of this framework on the real economy, focusing on changes in corporate lending and the availability of credit as the basis to evaluate whether the framework is an effective way in which to reduce moral hazard and promote robust financial markets.

Egle Jakucionyte, Swapnil Singh, 09 November 2020

Mortgage markets are dynamic in nature, which sometimes comes at a cost. This column shows that over the last few decades, the US mortgage market experienced a secular decline in co-borrowers. Having a co-borrower minimises the exposure and effects of adverse income shocks and thus should enhance mortgage performance. The authors show that this yet unexplored decline in co-borrowers therefore has non-trivial implications for the financial stability of the mortgage market and regional economic outcomes. 

Paweł Baranowski, Wirginia Doryń, Tomasz Łyziak, Ewa Stanisławska, 22 October 2020

To achieve macroeconomic stabilisation, central banks attempt to manage the expectations of the private sector. Decisions on short-term interest rates and communication can both impact expectations, but communication is especially important under the effective lower bound, when the room to move interest rates down is limited. Using data from Poland, this column shows that while monetary policy shapes the expectations of the private sector through both communication and interest rate decisions, the impact can differ depending on the variable forecasted and on the forecasting horizon.

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.



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