Secular Stagnation: A Working Pair of Scissors Needs Two Blades

There is a core divergence among some “Keynesian” and “Schumpeterian” economists who have proposed such stagnation hypotheses; each camp points to different underlying factors for continued anemic levels of growth. “Keynesians” argue from the demand side, and believe that proactive fiscal policies are needed for a strong recovery, while “Schumpeterians” believe that the necessary force of creative destruction has continually been stymied by such policies.

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Crisis Recovery: Flying on a Single Engine

Countercyclical moves by policy makers might have reduced the length and size of the observed output gap had fiscal policy operated as a countercyclical tool complementary to monetary policy. Regardless of whether restrictive fiscal policies have been a necessity or an option, the fact is that they have constituted a major factor leading to a subpar recovery performance.

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Access to Finance, Product Innovation, and Middle-Income Growth Traps

After experiencing an initial period of rapid growth, many developing countries have fallen into the middle-income “trap”—stuck between low-wage, low-technology markets and high-income, innovation-based developed economies. This note argues that inadequate access to finance has an adverse effect on innovation, directly, through the financing of fewer research and development (R&D) projects, and also indirectly, as fewer individuals may choose to invest in the skills necessary to work in R&D fields.

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O que vem freando o Brasil?

O Brasil tem um longo caminho pela frente. Para começar, os investimentos anêmicos em infraestrutura tradicional desde os anos 80 tornaram-se um forte freio à PTF, contribuindo para o desperdício e ineficiência dos atuais sistemas de produção. Isso poderia ser resolvido com um ajuste fino da divisão de trabalho, entre os setores público e privado, nos investimentos e na administração da infraestrutura, com a meta de arregimentar mais capitais privados. Certamente, o Brasil também deveria resolver a questão do valor agregado que afeta todas as economias de renda média, o que implica a necessidade de melhorar o cenário operacional do setor privado. Da forma como está, aspectos fundamentais desse cenário - como as complicadas exigências burocráticas e o excesso de horas de trabalho necessárias para pagar impostos - tornam o custo de se fazer negócios no Brasil incompatível com cadeias de produção complexas, além de corroer a produtividade, por desperdiçar recursos materiais e humanos. Por fim, para ajudar a melhorar a prestação de serviços, o Brasil deveria lançar uma revisão ampla dos gastos públicos. Os gastos públicos que vão além daqueles necessários para as funções básicas do governo comprometem uma parte importante do PIB do Brasil. Cortar os gastos que não são voltados à eliminação da exclusão e das armadilhas ao crescimento da infraestrutura permitiria ao governo elevar os investimentos nas áreas mais necessárias ou reduzir encargos tributários do setor privado.

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Orderly Sovereign Debt Restructuring: Missing in Action! (And Likely To Remain So)

An orderly sovereign debt restructuring should place the debtor nation's public debt on a sustainable trajectory while minimizing procrastination and contagion. However, the experiences with the debt crisis of the 1980s, Russia 1998, Argentina 2001, and Greece 2010 indicate that orderly debt restructurings remain elusive, even with high-powered official intervention. When solvency problems are present, the chances of success increase if official money is lent at the risk-free rate, reflecting its low risk, and if private creditors receive an upfront haircut. The paper examines the obstacles, which include moral hazard, difficulty in distinguishing between solvency and liquidity crises, and the “political economy” resistance to upfront haircuts. Orderly sovereign debt restructurings are likely to remain elusive notwithstanding recent evidence that the official mindset may be changing.

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Read more about the article Calibrating 2014
Cocoa beans are processed into cocoa liquor at the Golden Tree cocoa processing and chocolate plant in Tema, Ghana, June 27, 2006. (Photo by Jonathan Ernst)

Calibrating 2014

The global economy looks poised to display better growth performance in 2014. Leading indicators are pointing upward – or at least to stability – in major growth poles. However, for this to translate into reality policymakers will need to be nimble enough to calibrate responses to idiosyncratic challenges.

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Walking on the Wild Side – Monetary Policy and Prudential Regulation

Global financial integration and the linkages between the financial and the real sides of economies are sources of huge policy challenges. This is now beyond doubt, after what we saw in the run-up to and the unfolding of the 2008 global financial crisis. As a consequence, the established wisdom regarding monetary policies and prudential regulation has been subject to a deep critical review, including a demise of the belief that they should be maintained as fully independent functions.

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