Demography and economics: Look past the past

Charles A.E. Goodhart, Philipp Erfurth 04 November 2014

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Introduction

Our history is our database. When seeking to peer dimly into the future, our normal response is to examine what happened in (similar) past episodes and then to extrapolate those outcomes into the future. This assumption, that the future will mimic the past, is hard-wired into almost all our forecasting exercises, from the most simple to the econometrically and technically most complex.

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Topics:  Global economy Labour markets

Tags:  forecasting, demographics, Ageing, fertility, globalisation, savings, consumption, life cycle, old age, healthcare, Retirement, investment, interest rates, labour productivity, technology, technology transfer

Secular stagnation: Facts, causes, and cures – a new Vox eBook

Coen Teulings, Richard Baldwin 10 September 2014

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Teaser from original column posted on 15 August 2014

Six years after the Crisis and the recovery is still anaemic despite years of zero interest rates. Is ‘secular stagnation’ to blame? This column introduces an eBook that gathers the views of leading economists including Summers, Krugman, Gordon, Blanchard, Koo, Eichengreen, Caballero, Glaeser, and a dozen others. It is too early to tell whether secular stagnation is really secular, but if it is, current policy tools will be obsolete. Policymakers should start thinking about potential solutions.

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Topics:  Global crisis Macroeconomic policy Monetary policy

Tags:  interest rates, US, Europe, Japan, investment, macroeconomics, Great Recession, zero lower bound, savings, secular stagnation, SecStag debate

Is Piketty’s ‘Second Law of Capitalism’ fundamental?

Per Krusell, Tony Smith 01 June 2014

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Over the last several weeks, we have thought quite a bit about the main message in Thomas Piketty’s now world-famous book, Capital in the Twenty-First Century (Piketty 2014). We have also discussed it at great length with colleagues. In sum, at least in our departments, there has been a massive collective effort at interpreting both the material presented in the book and the background material on which the book builds. In this column we would like to present one perspective on the book that does not seem to have attracted sufficient attention in the public discussions.

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Topics:  Poverty and income inequality

Tags:  growth, Inequality, wealth, saving, savings

Why are savings so high among the young in urban China?

Mark R. Rosenzweig, Junsen Zhang 21 May 2014

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A well-known phenomenon in contemporary China is the high personal savings rates of households compared with those in developed countries and many low-income countries. A less-studied aspect of this is the elevated savings rates of the young relative to the middle-aged, first shown by Chamon and Prasad (2010) based on urban household data covering the years 1986–2005 for ten provinces.

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Topics:  Frontiers of economic research Global economy

Tags:  China, housing, family, savings, one-child policy

Why Asian firms hold cash

Charles Yuji Horioka, Akiko Terada-Hagiwara 25 January 2014

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In many, if not most, economies, sharp declines in household saving rates have been offset by sharp increases in corporate saving rates for the past two decades (see, for example, Karabarbounis and Neiman 2012). Even so, relatively little research has been done on the determinants of corporate saving.

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Topics:  Financial markets

Tags:  investment, Asia, saving, financial frictions, savings, corporate saving, borrowing constraints

China’s one-child policy and saving puzzle

Taha Choukhmane, Nicolas Coeurdacier , Keyu Jin 22 January 2014

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The Chinese household saving rate is high and has been rising sharply. Between 1983 and 2011, the average urban household saving rate rose by about 20 percentage points – from 10.4% to a staggeringly high level of 30.5%. This stands in sharp contrast with the low household savings rate in developed countries (about 5% in OECD economies). A fast-growing economy should in principle be borrowing against future income to bring forward consumption.

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Topics:  Education Gender Microeconomic regulation

Tags:  China, fertility, demographics, savings, one-child policy

Save more to improve infrastructure in Latin America and the Caribbean

Eduardo Cavallo 03 April 2013

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Saving and investment, like the chicken and the egg, involve circular causality. But regardless of causality, there is no doubt that Latin America and the Caribbean need more of both.

That the region has an infrastructure problem hardly requires an explanation:

  • There is a gap in terms of the quality and quantity of the stock of physical infrastructure in Latin America and the Caribbean compared with:
    • The region’s needs.
    • The advanced economies.
    • The emerging Asian countries.

The infrastructure gap is visible in:

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Topics:  Development

Tags:  Latin America, investment, Caribbean, savings

Oil exporters’ dilemma: How much to save and how much to invest

Reda Cherif, Fuad Hasanov 10 November 2012

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Policymakers in many commodity-exporting countries confront the question of how much to consume, save, and invest out of revenues from commodity exports (see van der Ploeg and Venables 2008). In the face of highly volatile commodity revenues (especially from oil), governments have to balance several objectives at the same time. These include smoothing consumption, ensuring intergenerational equity if a natural resource is exhaustible, managing volatility by building precautionary savings, and investing in capital to promote economic development.

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Topics:  Energy Macroeconomic policy

Tags:  investment, savings, oil exports

Precautionary savings in the Great Recession

Ashoka Mody, Damiano Sandri, Franziska Ohnsorge 22 February 2012

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A key feature of the Great Recession was a striking increase in uncertainty. The volatility of real GDP increased (left chart in Figure 1) and, at the same time, the higher unemployment rate raised the risks of job losses, longer unemployment durations, and, hence, of severe reductions in income (see Carroll 1992 for a similar interpretation of unemployment rates). These developments stood in marked contrast to the immediately preceding years of apparent tranquility, often characterised as the Great Moderation.

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Topics:  Macroeconomic policy

Tags:  OECD, crises, savings