One of the most puzzling facts in the wake of the Global Financial Crisis (GFC) is that output across advanced and emerging economies recovered at a much slower rate than anticipated by most forecasting agencies. This paper delves into the mechanics behind the observed slow recovery and the associated permanent output losses in the aftermath of the crisis, with a particular focus on the role played by financial frictions and investment dynamics. The paper provides two main contributions. First, we empirically document that lower investment during financial crises is the key factor leading to permanent loss of output and total factor productivity (TFP) in the wake of a crisis. Second, we develop a DSGE model with financial frictions and capital-embodied technological change capable of reproducing the empirical facts. We also evaluate the role of financial policies in stabilizing output and TFP in response to disruptions in financial markets.
Economies respond differently to aggregate shocks that reduce output. While some countries rapidly recover their pre-crisis trend, others stagnate. Recent studies provide empirical support for a link between aggregate growth and plant dynamics through its effect on productivity: the entry and exit of firms and the reallocation of resources from less to more efficient firms explain a relevant part of transitional productivity dynamics. In this paper we use a stochastic general equilibrium model with heterogeneous firms to study the effect on aggregate short-run growth of policies that distort the process of birth, growth and death of firms, as well as the reallocation of resources across economic units. Our findings show that indeed policies that alter plant dynamics can explain slow recoveries. We also find that output losses associated to delayed recoveries are large.
A New York Times Bestseller A Washington Post Notable Nonfiction Book of 2020 Named a Best Book of 2020 by NPR “A fascinating scientific, cultural, spiritual and evolutionary history of the way humans breathe—and how we’ve all been doing it wrong for a long, long time.” —Elizabeth Gilbert, author of Big Magic and Eat Pray Love No matter what you eat, how much you exercise, how skinny or young or wise you are, none of it matters if you’re not breathing properly. There is nothing more essential to our health and well-being than breathing: take air in, let it out, repeat twenty-five thousand times a day. Yet, as a species, humans have lost the ability to breathe correctly, with grave consequences. Journalist James Nestor travels the world to figure out what went wrong and how to fix it. The answers aren’t found in pulmonology labs, as we might expect, but in the muddy digs of ancient burial sites, secret Soviet facilities, New Jersey choir schools, and the smoggy streets of São Paulo. Nestor tracks down men and women exploring the hidden science behind ancient breathing practices like Pranayama, Sudarshan Kriya, and Tummo and teams up with pulmonary tinkerers to scientifically test long-held beliefs about how we breathe. Modern research is showing us that making even slight adjustments to the way we inhale and exhale can jump-start athletic performance; rejuvenate internal organs; halt snoring, asthma, and autoimmune disease; and even straighten scoliotic spines. None of this should be possible, and yet it is. Drawing on thousands of years of medical texts and recent cutting-edge studies in pulmonology, psychology, biochemistry, and human physiology, Breath turns the conventional wisdom of what we thought we knew about our most basic biological function on its head. You will never breathe the same again.
An analysis of the performance of GDP, employment and other labor market variables following the troughs in postwar U.S. business cycles points to much slower recoveries in the three most recent episodes, but does not reveal any significant change over time in the relation between GDP and employment. This leads us to characterize the last three episodes as slow recoveries, as opposed to jobless recoveries. We use the estimated New Keynesian model in Galí-Smets-Wouters (2011) to provide a structural interpretation for the slower recoveries since the early nineties -- National Bureau of Economic Research web site.
The COVID-19 pandemic struck the global economy after a decade that featured a broad-based slowdown in productivity growth. Global Productivity: Trends, Drivers, and Policies presents the first comprehensive analysis of the evolution and drivers of productivity growth, examines the effects of COVID-19 on productivity, and discusses a wide range of policies needed to rekindle productivity growth. The book also provides a far-reaching data set of multiple measures of productivity for up to 164 advanced economies and emerging market and developing economies, and it introduces a new sectoral database of productivity. The World Bank has created an extraordinary book on productivity, covering a large group of countries and using a wide variety of data sources. There is an emphasis on emerging and developing economies, whereas the prior literature has concentrated on developed economies. The book seeks to understand growth patterns and quantify the role of (among other things) the reallocation of factors, technological change, and the impact of natural disasters, including the COVID-19 pandemic. This book is must-reading for specialists in emerging economies but also provides deep insights for anyone interested in economic growth and productivity. Martin Neil Baily Senior Fellow, The Brookings Institution Former Chair, U.S. President’s Council of Economic Advisers This is an important book at a critical time. As the book notes, global productivity growth had already been slowing prior to the COVID-19 pandemic and collapses with the pandemic. If we want an effective recovery, we have to understand what was driving these long-run trends. The book presents a novel global approach to examining the levels, growth rates, and drivers of productivity growth. For anyone wanting to understand or influence productivity growth, this is an essential read. Nicholas Bloom William D. Eberle Professor of Economics, Stanford University The COVID-19 pandemic hit a global economy that was already struggling with an adverse pre-existing condition—slow productivity growth. This extraordinarily valuable and timely book brings considerable new evidence that shows the broad-based, long-standing nature of the slowdown. It is comprehensive, with an exceptional focus on emerging market and developing economies. Importantly, it shows how severe disasters (of which COVID-19 is just the latest) typically harm productivity. There are no silver bullets, but the book suggests sensible strategies to improve growth prospects. John Fernald Schroders Chaired Professor of European Competitiveness and Reform and Professor of Economics, INSEAD
We present a rational expectations model of credit-driven crises, providing a new perspective to explain why credit booms can lead to severe financial crises and aftermath slow economic recoveries. In our model economy, banks can operate in two types of business à la Minsky's narratives. They are sequentially aware of the deterioration of fundamentals of the speculative business and decide whether to continue credit extension in that business or liquidate capital and move into the traditional business. However, because individual banks face uncertainty about how many of their peers have been aware, they rationally choose to extend credit in the speculative business for a longer time than is socially optimal, leading to an over-delayed crisis and consequently more banks being caught by the crisis. This in turn renders the financial crisis more severe and the subsequent economic recovery slower. Within a standard textbook macroeconomic growth setting, our model generates rich dynamics of economic booms, slowdowns, crashes, and recoveries.
In the past decade, few subjects at the intersection of medicine and sports have generated as much public interest as sports-related concussions - especially among youth. Despite growing awareness of sports-related concussions and campaigns to educate athletes, coaches, physicians, and parents of young athletes about concussion recognition and management, confusion and controversy persist in many areas. Currently, diagnosis is based primarily on the symptoms reported by the individual rather than on objective diagnostic markers, and there is little empirical evidence for the optimal degree and duration of physical rest needed to promote recovery or the best timing and approach for returning to full physical activity. Sports-Related Concussions in Youth: Improving the Science, Changing the Culture reviews the science of sports-related concussions in youth from elementary school through young adulthood, as well as in military personnel and their dependents. This report recommends actions that can be taken by a range of audiences - including research funding agencies, legislatures, state and school superintendents and athletic directors, military organizations, and equipment manufacturers, as well as youth who participate in sports and their parents - to improve what is known about concussions and to reduce their occurrence. Sports-Related Concussions in Youth finds that while some studies provide useful information, much remains unknown about the extent of concussions in youth; how to diagnose, manage, and prevent concussions; and the short- and long-term consequences of concussions as well as repetitive head impacts that do not result in concussion symptoms. The culture of sports negatively influences athletes' self-reporting of concussion symptoms and their adherence to return-to-play guidance. Athletes, their teammates, and, in some cases, coaches and parents may not fully appreciate the health threats posed by concussions. Similarly, military recruits are immersed in a culture that includes devotion to duty and service before self, and the critical nature of concussions may often go unheeded. According to Sports-Related Concussions in Youth, if the youth sports community can adopt the belief that concussions are serious injuries and emphasize care for players with concussions until they are fully recovered, then the culture in which these athletes perform and compete will become much safer. Improving understanding of the extent, causes, effects, and prevention of sports-related concussions is vitally important for the health and well-being of youth athletes. The findings and recommendations in this report set a direction for research to reach this goal.
This original and panoramic book proposes that the underlying forces of demography and globalisation will shortly reverse three multi-decade global trends – it will raise inflation and interest rates, but lead to a pullback in inequality. “Whatever the future holds”, the authors argue, “it will be nothing like the past”. Deflationary headwinds over the last three decades have been primarily due to an enormous surge in the world’s available labour supply, owing to very favourable demographic trends and the entry of China and Eastern Europe into the world’s trading system. This book demonstrates how these demographic trends are on the point of reversing sharply, coinciding with a retreat from globalisation. The result? Ageing can be expected to raise inflation and interest rates, bringing a slew of problems for an over-indebted world economy, but is also anticipated to increase the share of labour, so that inequality falls. Covering many social and political factors, as well as those that are more purely macroeconomic, the authors address topics including ageing, dementia, inequality, populism, retirement and debt finance, among others. This book will be of interest and understandable to anyone with an interest on where the world’s economy may be going.
