The Long Run

Long Run Focus

Long Run Focus

How much scarring will the pandemic leave?

The pandemic’s most significant economic legacy in India will be a heavily-damaged banking sector that is likely to constrain investment over the years ahead. This underpins our view that the economy could be 5% smaller over the long run than it would have been had the pandemic not happened. In view of the wider interest, we have also made this publication available to clients of our Long Run service.

17 November 2021

Long Run Focus

The pandemic and EM scarring risks

The pandemic is likely to inflict lasting damage on potential growth in economies in much of Latin America, Africa and South and Southeast Asia, adding to the structural headwinds that they already faced. However, the risk of permanent scarring in many other emerging markets – including much of East Asia and Emerging Europe – is overstated. In view of the wider interest, we have made this Emerging Markets Update available to clients of our Long Run Service

9 September 2021

Long Run Focus

The CBDCs are coming

We expect some major central banks to issue digital currencies later this decade, with those in countries where cash is rarest proceeding the fastest. The first generation of central bank digital currencies will be purposely designed not to shake up the status quo. But once established they would offer powerful new policy tools. It would be naïve to think that sooner or later central banks won’t consider using them.

6 July 2021
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Long Run Focus

Global migration to bounce back

Global migration has ground to a halt over the past year or so, but we doubt that the pandemic will have any major lasting impact. Moreover, there is potential for migration to get a fresh impetus from a big rise in the number of people leaving Africa over the coming decades. This could help to mitigate the problem of ageing populations in developed markets, although countries will continue to display varying degrees of openness to immigration.

Long Run Focus

Will we start working less?

The downward trend in average working hours in advanced economies has slowed or stalled in the past few decades. Yet there are reasons to think that the decline will resume, at least in some sectors and some countries. Other things equal, fewer hours worked would dent GDP. However, a reduction in working hours could boost participation and/or make workers more productive. As for the impact on the composition of economies, a rise in leisure time could give a boost to recreational sectors.

13 May 2021

Long Run Focus

Accelerated technology use will improve productivity

There is evidence that the pandemic has accelerated technology use, partly through increased equipment investment but mainly through a change in the way that people work. The effects on productivity might not be immediate or huge, but they will be positive. And perhaps the most important point is that the pandemic seems to have altered attitudes towards technology, making future adoption more likely. This supports our optimism about the long-run prospects for productivity growth in developed economies.

16 April 2021

Long Run Focus

Another decade of negative real interest rates

The equilibrium level of real interest rates in the global economy may not remain quite as low as of late, but we expect any rise to be gradual and small. With policymakers at the same time taking a more tolerant attitude towards inflation, actual real interest rates look set to stay low for a long time. This will help to sustain high levels of public sector debt but could imperil financial stability by incentivising risk-taking.

Long Run Focus

The winners and losers from climate change

Climate change will be more costly to EMs than developed countries, with parts of Africa, as well as South and South East Asia most vulnerable to rising global temperatures. That said, some EMs could benefit as investments to mitigate climate change increase. One group of winners will be commodity producers that are able to provide the resources needed for the transition to cleaner forms of energy.

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