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.

Maarten Verwey, Björn Döhring, 07 July 2020

Forecasters agree that the economic fallout from COVID-19 has caused the sharpest drop in economic activity in Europe and globally since WWII. Just how deep the drop of activity was in the second quarter, which sectors were most strongly affected by containment measures, and how swift the rebound will be as they are gradually lifted is still very uncertain. This column describes how the European Commission’s Summer 2020 interim European Economic Forecast now estimates a deeper drop of output in the second quarter of the current year than was anticipated earlier. The recovery is also now expected to be less swift than was projected in Spring, with differences across Member States set to be more pronounced. Minimising hysteresis and avoiding persistent economic divergences within the EU and euro area requires the rapid agreement and deployment of common support measures at the EU level. The risk otherwise is of significant distortions to the internal market and of even deeper divergences between countries that could ultimately threaten the smooth functioning of the monetary union. 

Ethan Ilzetzki, 06 July 2020

The UK economy is suffering its worst recession in centuries, with national income declining and unemployment rising at unprecedented rates. This column reports on the latest Centre for Macroeconomics survey, which reveals that despite this worrisome news, the panel is optimistic that the UK economy will recover to its pre-pandemic trend within five years or less, no worse than past UK recessions. Panellists emphasised that these predictions depend on the government effectively containing the spread of the virus and not reverting to austerity policies following the pandemic. The panel was split on the biggest risks to the pace of recovery, with firms’ productive capacity, scarring effects of unemployment, and a slow demand recovery cited as prominent concerns. 

David Popp, Francesco Vona, Joëlle Noailly, 04 July 2020

Many governments worldwide are currently considering fiscal recovery packages to address the Covid-19 crisis. This column analyses the impact of past green fiscal stimulus on employment. Focusing on the American Recovery and Reinvestment Act after the Global Crisis, it finds that that the green stimulus was particularly effective in creating jobs in the long run, but not in the short run. Hence, while green stimulus packages are useful to reorient the economy and direct it onto a green trajectory in the longer run, they are less effective in restarting the economy quickly.

Lucia Alessi, Peter Benczur, Francesca Campolongo, Jessica Cariboni, Anna Rita Manca, Balint Menyhert, Andrea Pagano, 26 September 2018

Over recent decades, scholars and policymakers have been exploring how to make economies more resilient to potential shocks. This column investigates which EU members showed resilience during the Global Crisis and attempts to identify characteristics associated with resilience. The results reveal a lot of heterogeneity amongst countries, and those that are more resilient in the short run are not necessarily those with superior recoveries down the line. Further analyses show that social expenditures, political stability, and competitive wages are important for impact, medium-run, and ‘bounce forward’ resilience, respectively. 

Mário Centeno, Miguel Castro Coelho, 06 June 2018

Portugal has turned a corner. Having gone through a mild boom, a slump, and a severe recession, all packed into less than two decades, the Portuguese economy has re-emerged with a newfound strength. This column examines this recovery in detail, focusing on important structural reforms that have taken place in the last couple of decades in key areas such as skills, investment, export orientation, labour market, financial intermediation, and public finances. The effects of these reforms were compounded by time as well as efforts to reignite demand.

Colin Mayer, 24 January 2018

Following the 2008 financial crisis, investments recovered quicker in the US than in Europe. Colin Mayer discusses how taxation and regulation have exacerbated companies' long-term debt problem. This video was recorded at the RELTIF book launch held in London in January 2018.

Marco Buti, Björn Döhring, 09 November 2017

The Eurozone economy is growing at its fastest rate in a decade, but the recovery remains incomplete. This column presents the European Commission’s autumn forecast, and derives some policy considerations. Accommodative macroeconomic policies are still appropriate for now. The column also highlights the need for structural policies to increase the potential for growth and help to share the benefits more fairly.

Refet Gürkaynak, Philippe Weil, 24 August 2017

This column presents the first bi-annual report from CEPR’s Euro Area Business Cycle Dating Committee on the state of the Eurozone business cycle. The main findings are that the Eurozone expansion is continuing slowly, but is creating employment at a rapid pace; the recovery is commensurate with the US recovery once the Eurozone’s double-dip sovereign debt recession is factored in; and the heterogeneity in the pace of recovery of individual member countries is driven by the heterogeneity in their recessions.

Ramon Xifré, 29 August 2016

Spain implemented a host of structural reforms following the Global Crisis. But questions remain about whether the current economic condition is due to the reforms or to ‘automatic’ adjustment in public and private sectors. This column sheds light on these questions by examining changes in a set of economic indicators following the introduction of the reforms. Five stylised facts are presented that suggest limitations of the reforms. Much of the current climate appears to reflect inherent limitations of the Spanish economy.

Jason Furman, Jay Shambaugh, 29 April 2016

In terms of GDP and unemployment, the US’s recovery from the crisis was relatively rapid. This was in large part due to forceful fiscal policy conducted by the Obama Administration. This column surveys the lessons for other economies, which have seen less-convincing recoveries. Around the world, increased spending and tax cuts over the last eight years have had positive effects. Continuing recovery will require concerted action in these directions.

Biagio Bossone, Marco Cattaneo, 04 January 2016

‘Helicopter tax credits’ have been proposed as a means of injecting new purchasing power into the economies of Eurozone Crisis countries. This column outlines one such system for Italy. The Tax Credit Certificate system is projected to accelerate Italy’s recovery over the next four years, and will likely be sustainable. It also provides a tool to avoid the breakup of the Eurosystem and its potentially disruptive consequences.

Ross Levine, Chen Lin, Wensi Xie, 29 July 2015

Some have argued that the stock market serves as a ‘spare tire’ during banking crises by providing an alternative corporate financing channel. This column examines the claim using data for 36 countries spanning 20 years. The findings support the three core predictions of the spare tire view, suggesting that countries can insulate parts of their economy from future banking crises by designing appropriate legal frameworks.

Simon Wren-Lewis, 30 January 2015

The anaemic recovery from the Global Crisis and the downward trend in real interest rates since 1980 have revived interest in the idea of secular stagnation. This column argues that if the US, UK, and Eurozone had not pursued contractionary fiscal policies from 2010 onwards, the recovery would not have been so slow and nominal interest rates would no longer be at the zero lower bound. Expanding the stock of government debt would have ameliorated, not worsened, the shortage of safe assets.

Stijn Claessens, 18 April 2014

Stijn Claessens talks to Viv Davies about the recent IMF book titled 'Global Crises: Causes, Consequences and Policy Responses', co-edited with M Ayhan Kose, Luc Laeven, and Fabian Valencia. The book provides a comprehensive overview of current research into financial crises and the policy lessons learned. They discuss crisis prevention and management, and the crisis in the Eurozone. The interview was recorded in April 2014.

Olivier Blanchard, 27 January 2014

The global economy seems to be on the mend. In this column, IMF Chief Economist Olivier Blanchard provides a quick overview of the likely developments. The key points are that the recovery is happening as expected, but it remains fragile and uneven across major economies. Normalising monetary policy poses risks for vulnerable emerging markets and deflation is a real concern for the Eurozone.

Antonio Fatás, Ilian Mihov, 14 August 2013

The last recession in the US ended in June 2009. Yet, three years on, unemployment remains high. This column argues that we need to better understand how business cycles of recession and expansion work. Detailed evidence from the US suggests that recoveries are not simply mirror images of recessions. Because of its policy relevance, economists and policymakers must acknowledge that the pattern of recession/recovery has significantly changed over the last half century.

Richard Wood, 11 May 2013

The world economy seems to be acting in unexpected ways. This column argues that austerity and quantitative easing do not seem to be working out as advertised. There is an urgent need to review the effectiveness of alternative macroeconomic policy approaches, and prepare an internationally agreed pro-growth plan to reflate distressed economies. The outlines of one such plan are presented.

Olivier Blanchard, 13 February 2013

The new year has provided cheer for macroeconomic optimists. This column by Olivier Blanchard, one of the world’s leading economists, argues that important progress has been made in putting the crisis behind us, but that recovery continues to be hampered by the need for fiscal consolidation and a weak financial system.

Carmen Reinhart, Kenneth Rogoff, 22 October 2012

The strength of the US recovery has become a political issue in the presidential election. The US is doing better than other advanced economies, but famous economists associated with the Romney campaign claim this is not good enough. The US, they argue, is different. Here, the masters of the 'this time is different' research genre – Carmen Reinhart and Ken Rogoff – argue that US historical performance is not different when it is properly measured, so the economy’s performance is better than expected.

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