What I learnt about growth policy at the World Bank

Brian Pinto 17 December 2014

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Growth concerns have gone global. Advanced economies are beset by fears of secular stagnation, the IMF recently cut estimates of potential growth in emerging markets by 1.5 percentage points relative to 2011, and G20 leaders approved 800 new measures at Brisbane 2014 for raising G20 GDP by an incremental 2.1% by 2018.1

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Topics:  Development Institutions and economics

Tags:  growth, secular stagnation, emerging markets, World Bank, structural reform, Transition economies, financial crisis, global crisis, debt overhang, exchange rates

Causes of the G7 fixed investment doldrums

Kristina Morkunaite, Felix Huefner 27 November 2014

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Investment has been disappointing in recent years

Growth in mature economies has consistently disappointed in the years following the Global Crisis, and forecasts are regularly being revised downwards – just recently again by the IMF. An important part of the sluggish recovery in mature economies has been weak fixed investment. Total investment relative to GDP in the G7 economies stood at 19.3% in 2013 – a decline of 2.6 percentage points relative to 2007.

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Topics:  Global crisis Global economy

Tags:  global crisis, investment, secular stagnation, monetary policy, interest rates

Regional wage differentials in the public sector

Masayuki Morikawa 23 November 2014

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After the global financial crisis, some European countries reduced their public sector wages to ensure fiscal sustainability. In Japan, after the Great East Japan Earthquake, the wages of the central government officials were cut for two years to finance the reconstruction expenses. Even in normal times, the appropriate level of public sector wages is debated frequently in every country. Because wages are an important incentive for workers, appropriate wage levels and their structure in the public sector are essential for ensuring the quality and efficiency of public services.

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Topics:  Labour markets

Tags:  fiscal sustainability, global crisis, Public sector wages, public-sector pay, Public sector, private sector, Great East Japan Earthquake, Japan, Europe, agglomeration, spatial equilibrium, wages, wage premia, regional wage differentials

Recent slowdown in global trade: Cyclical or structural

Emine Boz, Matthieu Bussière, Clément Marsilli 12 November 2014

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Introduction

Global trade started to slow down markedly in the course of 2011, after it bounced back from the Great Trade Collapse of 2008–2009.1 In 2012 and 2013 the growth rate of global trade volume reached only 3%, against nearly 7% in the pre-crisis period (2002–2007) and 6.8% in the period 1985–2007 (Figure 1).

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Topics:  Global crisis International trade

Tags:  great trade collapse, trade slowdown, global crisis, trade, global value chains, protectionism

Policy uncertainty spillovers to emerging markets: Evidence from capital flows

Dennis Reinhardt, Cameron McLoughlin, Ludovic Gauvin 05 November 2014

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In the wake of the global financial crisis of 2007–2008, advanced economies experienced heightened levels of uncertainty in macroeconomic policymaking. Against this backdrop, policymakers debated the domestic and global spillover implications of advanced-country policy uncertainty (e.g. IMF 2013). At the same time, the potential for monetary policy settings in advanced countries to spill over to emerging market economies (EMEs) via capital flows was hotly contested in both academic and policymaker circles (e.g. Fratzscher et al. 2013).

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Topics:  International finance Macroeconomic policy Monetary policy

Tags:  capital flows, Capital inflows, emerging markets, policy uncertainty, spillovers, global crisis, monetary policy, macroeconomic policy, risk aversion, home bias

Monetary policy and long-term trends

Charles A.E. Goodhart, Philipp Erfurth 03 November 2014

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Introduction

There has been a long-term downward trend in the share and strength of labour in national income, which is depressing both demand and inflation. This has prompted ever more expansionary monetary policies. While understandable, indeed appropriate, within a short-term business cycle context, this has exacerbated longer-term trends, increasing inequality and financial distortions. Perhaps the most fundamental problem has been over-reliance on debt finance (leverage).

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Topics:  Financial markets Macroeconomic policy Monetary policy

Tags:  monetary policy, Inequality, debt, leverage, wages, labour share, globalisation, consumption, propensity to consume, fiscal policy, Ageing, interest rates, investment, asset prices, housing, house prices, exchange rates, global crisis, mortgages, sub-prime crisis, Macroprudential policy, structural reforms, balance sheets, deleveraging, equity, shared-equity mortgages, Help to Buy

Home prices since 1870: No price like home

Katharina Knoll, Moritz Schularick, Thomas Steger 01 November 2014

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For economists there is no price like home – at least not since the global financial crisis. Fluctuations in house prices, their impact on the balance sheets of consumers and banks, as well as the deleveraging pressures triggered by house price busts have been a major focus of macroeconomic research in recent years (Mian and Sufi 2014, Jordà et al. 2014, Shiller 2009).

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Topics:  Economic history Financial markets

Tags:  housing, house prices, global crisis, land prices, transport costs, transport revolution, land-use restrictions, zoning laws, Inequality

A 100-year perspective on sovereign debt composition in 13 advanced economies

S. M. Ali Abbas, Laura Blattner, Mark De Broeck, Asmaa El-Ganainy, Malin Hu 27 October 2014

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Why sovereign debt composition matters

Academic, policy, and market interest in sovereign debt has spiked since the 2008 Global Crisis. Researchers have sought to place the post-Crisis synchronised build-up in sovereign debt ratios in advanced economies within a longer-term/historical context, drawing comparisons with debt surges during the Great Depression, debt consolidations in the aftermath of World War II, and more.1

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Topics:  Economic history Financial markets Macroeconomic policy

Tags:  sovereign debt, global crisis, original sin, debt maturity, currency risk, financial repression, debt sustainability

Macroeconomic policy mix in the transatlantic economy

Moreno Bertoldi, Philip R. Lane, Valérie Rouxel-Laxton, Paolo Pesenti 24 October 2014

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The reason why the macroeconomic policy mix has been different on the two sides of the Atlantic in recent years remains a hotly debated issue. Was it due to a different reading of the root causes of the Global Crisis and, therefore, of the type of policy response considered most appropriate?

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Topics:  Global crisis Macroeconomic policy

Tags:  eurozone, US, macroeconomic policy, transatlantic economy, global crisis

Corporate governance of banks: Risk appetite as a pre-commitment mechanism

Patricia Jackson 13 October 2014

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Since the Global Crisis the authorities have been focusing on how to make banks safer, with changes to capital and liquidity requirements. Corporate governance of banks and the wider risk culture are also in the frame. Laeven and Ratnovski (2014) look at governance and raise three aspects: better risk management, regulation of pay, and enhanced market discipline. Another lens is to consider the effectiveness of the board and in particular its independence. However, several papers (e.g. Erkens et al. 2012 and Adams 2012) have found that this is negatively related to outcomes in the Crisis.

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Topics:  Financial markets Global crisis

Tags:  global crisis, banking, capital requirements, liquidity requirements, risk management, corporate governance, Culture

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