Documents business cycle 197 results

"Multiple global crises – including the pandemic, climate change, and Russia's war on Ukraine – have recently linked together in ways that are significant in scope, devastating in effect, but poorly understood. A growing number of scholars and policymakers characterize the situation as a ‘polycrisis'. Yet this neologism remains poorly defined. We provide the concept with a substantive definition, highlight its value-added in comparison to related concepts, and develop a theoretical framework to explain the causal mechanisms currently entangling many of the world's crises. In this framework, a global crisis arises when one or more fast-moving trigger events combine with slow-moving stresses to push a global system out of its established equilibrium and into a volatile and harmful state of disequilibrium. We then identify three causal pathways – common stresses, domino effects, and inter-systemic feedbacks – that can connect multiple global systems to produce synchronized crises. Drawing on current examples, we show that the polycrisis concept is a valuable tool for understanding ongoing crises, generating actionable insights, and opening avenues for future research."

"Elevated concerns over the consequences of recent rises in the UK economic inactivity rate for growth, wages and prices have prominently featured in recent public debate about the labour market and the economy. This paper documents the path of economic inactivity over time, disaggregated along several dimensions in an attempt to evaluate whether or not rising inactivity does indeed have consequences for growth and wages. First of all it is important to highlight that, over the longer run, inactivity is still quite a lot lower now than it has been for some time. This makes the recent rise in inactivity looks more like a cyclical blip, rather than a long-term trend. Second, spatial disparities in inactivity growth are not positively correlated with wage growth. If anything, rising inactivity is associated with lower wage growth. Thirdly, the inactivity rise has been partially offset by growth in employment of workers above statutory retirement age. Consequently, the elevated concern of sizable negative consequences of the recent rise in inactivity looks to be somewhat misplaced. Moreover, the inactivity shifts effects are unequally distributed, an important aspect which appears overlooked in the discussion, especially with regard to policy. Inactivity is strongly concentrated on certain groups of the population and is linked to both aggregate and local economic performance, falling in good times, and rising in bad. As such, policy going forward needs to try to avoid spending time on issues that may resolve themselves as the economy recovers. This means the prime focus should be on what has been an issue for quite some time now, namely the persistently low labour force participation among older, less skilled workers with illness in economically disadvantaged areas."

"This article considers how policymakers should react to the disruption of Global Value Chains, which became dramatically evident during the pandemic. It argues that repeated shocks to GVCs, as seen in recent years, are not purely random and disjointed events. They are the result of fundamental shifts in the geopolitical environment, global economy, and climate. Firms have concluded that international supply chains have become endemically riskier, and this is changing their risk/efficiency calculus. But there is no reason and – so far – little evidence to suggest that GVCs will stage a large-scale retreat. Powerful economic forces are at work that will prompt increased reliance on GVCs and improve their operability in the future. Governments tend to overreact when faced with supply shocks, and unnecessarily impede GVCs; more nuanced and coordinated responses are needed. The WTO can play an important role, promoting the resilience of GVCs."

"I examine the impact of macroeconomic uncertainty on labor market outcomes for skilled and unskilled workers and propose a new channel to improve our understanding of the underlying propagation mechanisms. I find that uncertainty shocks are recessionary with the unskilled experiencing a steeper fall in employment. To rationalize these findings, I build a New Keynesian DSGE model with skill heterogeneity and wage rigidities, which, coupled with precautionary labor supply, significantly amplify contractionary effects of uncertainty on the real economy."

"We quantify the connection between inequality and business cycles in a medium-scale New Keynesian model with tractable household heterogeneity, estimated with aggregate and cross-sectional data. We find that inequality substantially amplifies cyclical fluctuations. The primary source of this amplification is cyclical precautionary saving behavior. Savers reduce their consumption to insure themselves against the idiosyncratic risk of large income drops, which rises in recessions."

"The intersection of Economics and Nature has long been overlooked, but recent events have shed new light on their interconnectedness. This paper explores this relationship, focusing on the impact of economic cycles and the role of GDP as a measure of economic success. The paper highlights the historically dominant role of GDP, tracing its origins from Simon Kuznets' report in the 1930s to the present. It considers the rise of quantitative growth as a paradigm and its influence on economic policy, including the neo-liberal perspective that prioritises private market initiative. The paper concludes by exploring the potential for change in the aftermath of the syndemic crisis, and argues for a move away from GDP-centred measurements towards indicators that are fully researched and ready to use."

"Do labour institutions influence how wages respond to the business cycle? Such responsiveness can then shape several economic outcomes, including unemployment. In this paper, we examine the role of two key labour market institutions - collective bargaining and temporary contracts - upon wage cyclicality. Our evidence is drawn from rich, 2002-2020 matched data from Portugal. We find that workers not covered by collective agreements exhibit much higher wage cyclicality, especially if new hires, compared to covered workers. In contrast, workers under fixed-term contracts do not exhibit sizable differences in cyclicality compared to counterparts under open-ended contracts. Our findings highlight a novel angle through which labour institutions influence the labour market and the economy."

"World trade growth was rapid in the two decades prior to the global financial crisis but has halved subsequently. There are both structural and cyclical reasons for the slowdown. A deceleration in the rate of trade liberalisation post 2000 was initially obscured by the ongoing expansion of global value chains and associated rapid emergence of China in the world economy. Post the financial crisis global value chains started to unwind and, possibly associated with this, Chinese and Asian trade weakened markedly. These structural changes were compounded by insipid demand due to anaemic growth of global investment, as well as intra-euro area trade, both of which are trade intensive. The slowdown in world trade growth post crisis, if sustained, will have serious consequences for the medium-term growth of productivity and living standards. Trade policy has significant potential to reinvigorate trade growth but the political environment for reforms is difficult, with a growing polarisation of OECD electorates into pro- and anti- globalisation supporters. Further trade and investment policy liberalisation should be introduced as part of a wider package of structural reforms to spread the benefits of freer trade and investment more widely."

"This paper provides new evidence of the effect of monetary policy shocks on income inequality. Using a measure of unanticipated changes in policy rates for a panel of 32 advanced and emerging market countries over the period 1990-2013, the paper finds that contractionary (expansionary) monetary actions increase (reduce) income inequality. The effect, however, varies over time, depending on the type of the shocks (tightening versus expansionary monetary policy) and the state of the business cycle, and across countries depending on the share of labor income and redistribution policies. In particular, we find that the effect is larger for positive monetary policy shocks, especially during expansions. Looking across countries, we find that the effect is larger in countries with higher labor share of income and smaller redistribution policies. Finally, while an unexpected increase in policy rates increases inequality, changes in policy rates driven by an increase in growth are associated with lower inequality."