Long term growth

Post n°190
Published on 12/03/2020

1st prize-winning blog in the 2020 Eco Notepad Challenge - by Mathilde Salin et Louis Daumas

Less than a generation lies ahead of us to carry out the bulk of the changes needed to attenuate climate change. Such a rapid transition will imply the loss of a significant share of the physical, human and financial capital accumulated in carbon-intensive sectors. We need to acknowledge this loss and look at ways of making it tolerable.

An example: Propagation of stranded assets in the extractive sector
An example: Propagation of stranded assets in the extractive sector Sources: authors and Cahen-Fourot et al. 2019. Note: Stranded assets (forced capital under-employment) in the fossil extractive sector will directly or indirectly lead to asset stranding in sectors downstream.
Post n°179
Published on 09/03/2020

While the Covid-19 shock to the world economy is, in many respects, unprecedented, the recovery that is expected could nevertheless be similar to past ones. Reconstruction and sectoral reallocation of activity and employment are processes that take time, and debt is likely to weigh on aggregate demand. The speed of the recovery will therefore depend less on the nature of the shock than on the measures taken to limit its impact.

Chart 1 Fall in Unemployment in France, Germany, Italy and the United States during recent recoveries.
Chart 1 Fall in Unemployment in France, Germany, Italy and the United States during recent recoveries. Source: OCDE.
Post n°169
Published on 07/03/2020

Climate policy has so far had limited results despite national commitments under the Paris agreement. Various scenarios establishing a cost-benefit balance of this policy bring to light the main obstacles it is facing. Its net gains are highly significant but remote in time and very unevenly distributed between countries.

Chart 1: Impact on world GDP of global warming and climate policies (as a % of GDP)
Chart 1: Impact on world GDP of global warming and climate policies (as a % of GDP) Source : Alestra, Cette, Chouard and Lecat (2020)
Post n°165
Published on 06/10/2020

Sharp increases in government debt have occurred in post-war periods. While inflation, albeit at times moderate, was the norm in the 20th century, this had not occurred in previous centuries, even though wars had led to similar increases in public debt. One of the reasons for this is that this debt was set aside in a sinking fund for repayment at a later date.

Chart 1: Inflation and government debt in the United Kingdom (1700-1950)
Chart 1: Inflation and government debt in the United Kingdom (1700-1950) Source: Bank of England
Post n°159
Published on 04/27/2020

The current recession is expected to be shallower than the Great Depression of 1929, but deeper than the Great Recession of 2008. It could be shorter than these two financial crises because of the temporary and exogenous nature of the shock that caused it. It could contribute to the deployment of the digital economy, thereby boosting productivity and growth.

Chart 1a: The current recession compared to previous ones. Euro Area.
Chart 1a: The current recession compared to previous ones. Euro Area. Source: www.longtermproductivity.com Note: (GDP growth in %, periods of war in dotted lines, IMF forecast in orange)
Post n°149
Published on 01/22/2020

By Stéphanie Lange-Gaumand (French Embassy in Japan), Baptiste Meunier and Brieuc Monfort (Sophia University, Japan, and FFJ-EHESS)

Japan is a special case in that it is one of the first countries to face an ageing population. It is also unique in terms of the magnitude of this demographic: the proportion of people over 65 years old is the highest in the world and its population is expected to fall by 40% by 2100. Japan seems to have accepted this population decline and has focused on controlling welfare spending, which reflects national preferences.

Chart 1 – Contraction and ageing of the population
Chart 1 – Contraction and ageing of the population Source: UN forecasts (2019)
Post n°141
Published on 11/06/2019

1st prize-winning blog in the 2019 Eco Notepad Challenge - By Nicolas Laine (ESCP)

The technological revolution raises numerous questions as it permeates every aspect of our daily lives. Real hopes or legitimate concerns? To separate true from false, let’s take a look at this conversation between two friends, overheard in rue Croix des Petits Champs…

Source: author, with the help of Ariane Mostamandy (drawings)
Post n°139
Published on 10/25/2019

While the duration of an expansion can intuitively be associated with its age, a study of historical GDP data for the euro area reveals that this is not the case. Old economic expansions are as likely to disappear as new ones. Like J. R. R. Tolkien's Elves, expansions are "biologically immortal": they do not die of old age, but of exogenous causes.

Chart 1 - The duration of expansions does not depend on their age
Chart 1 - The duration of expansions does not depend on their age Source: Author's calculations. The Durland and McCurdy (1994) model is applied to the euro area growth rate.
Post n°130
Published on 09/05/2019

By Philippe Aghion (Collège de France and LSE), Antonin Bergeaud (Banque de France), Richard Blundell (UCL and IFS) and Rachel Griffith (University of Manchester and IFS)

Technical progress forces workers to adapt to new production methods. It thus favours the most highly skilled workers as they earn relatively higher wages than the least skilled. However some less qualified employees can also benefit from these technical changes provided, they have the skills sought after by innovative firms.

Chart 1: Average hourly wage by age and skill level for low-skilled occupation workers in innovative and non-innovative firms
Chart 1: Average hourly wage by age and skill level for low-skilled occupation workers in innovative and non-innovative firms Note: Data for the United Kingdom taken from the Annual Survey of Hours and Earnings, matched to the Business Expenditure on Research and Development survey (2004-2016). Hourly wages in GBP on a logarithmic scale. Source: Aghion et al. (2019).
Post n°120
Published on 07/09/2019

By Florens Odendahl (Banque de France)

If we consider that future economic outcomes are inherently uncertain, this gives rise to the notion of economic risk. For instance, what is the probability of a contraction in future GDP growth? Extending this idea to the case of several variables, we can address questions about the joint development of risks to GDP growth and inflation, for example.

Figure 1: The central tendency alone does not reflect information about macroeconomic risk
Figure 1: The central tendency alone does not reflect information about macroeconomic risk Source: Adrian et al. (2019) Note: one-year-ahead density forecasts of US real GPD growth.

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