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Three years on from the riots and deep economic, financial and political crisis, is the reforming Greek economy turning a corner and improving outcomes for the key macroeconomic indicators. Professor Paul Collier labelled Greece as a "sub-merging economy" a little while ago but there are now some positive signs reflected in this highly relevant news report from the Financial Times. I have added some key macro data on Greece and other troubled Euro Area countries using data from the IMF World Economic Outlook.
Guardian: Greece forges template for economic recovery as tourists pour in: http://www.theguardian.com/world/2014/jul/03/greec...
BBC video: Pain in paradise for struggling Greeks: http://www.bbc.co.uk/news/world-europe-28012089read more...»
This Mini Lecture discusses issues of labour productivity, low-wage work and economic growth of emerging markets.read more...»
A new online comedy series launches on Thursday 24th July!
The series tells the story of Scott and Adrian, two lovers on the verge of break up. Scott runs an oil company – bath oils that is – and Adrian spends their money as if it’s his own. Will they work things out or will Scott go it alone? All will be revealed when the series launches this August in time for the Scottish independence referendum.read more...»
This interview with Jurgen Maier of Siemens is well worth reading on several different levels. It challenges the conventional wisdom that UK will always lag behind Germany in terms of high value added manufacturing; it refers to the economics risks of Brexit (Britain leaving the EU) and it also stresses the importance to the UK of foreign investment from German businesses many of which have been in the Uk since well before the first World War - Siemens and Bosch are two well-known examples.read more...»
This question gives students a superb opportunity to explore the debate surrounding economic growth in in the leading advanced nations of the global economy. It ties in well with research into the effects of globalisation and the legacy from the financial crisis. I have put together some reading and short video clips that might be relevant to the discussion:
Secular stagnation: (or .... growth pessimism!)
"Secular stagnation refers to the idea that the normal, self-restorative properties of the economy might not be sufficient to allow sustained full employment along with financial stability without extraordinary expansionary policies. The idea was put forth first by Alvin Hansen in the late 1930s." (Source: http://www.washingtonpost.com/blogs/wonkblog/wp/20...)
One common interpretation is that - if we are in an age of secular stagnation - and this is an idea that might just be wrong! Maintaining demand often requires extensive periods of ultra loose monetary policy which in turn can create fresh bubbles in property and equity markets.
Is the secular stagnation argument too pessimistic? Can advanced economies rev up the engine of growth once more perhaps by using structural reforms to boost their competitiveness and drive new investment?read more...»
The European Central Bank implemented a negative interest rate policy yesterday. Whilst we have become very accustomed to a low base rate in the UK, the ECB policy seems extraordinary.
The policy has come about due to a continued concern over the economic situation in the Eurozone. Growth remains weak, unemployment is high and inflation sits below the target of 2% in many of the 18 countries. The ECB is unlikely to follow the UK (and others) strategy of quantitative easing and so is left with fewer choices.
By setting a negative interest rate, the ECB wants to discourage banks from keeping larger reserves and promote a greater level of lending (and thus stimulate economic growth).
If you want to download a short Powerpoint slideshow that explains the policy and its possible consequences then click on this link.
High rates of long term youth unemployment will have hugely significant economic and social costs - this short news report from Al Jazeerah news looks at the issue of youth unemployment in Portugalread more...»
May 2014 marks the tenth anniversary of Poland's accession to the European Union. Poland was easily the largest of the ten countries that came into the EU single market a decade ago. It was an important economic and geo-political moment for a country of just under forty million inhabitants.
The country has always traded heavily with the EU and that trade dependency has deepened over the last ten years. According to economists at HSBC, Poland is well placed to sustain strong export growth even though much of Western Europe as a whole is struggling to escape from below trend growth.
Poland has had the most stable growth of any economy in Europe in recent years. It avoided a recession in the aftermath of the Global Financial crisis - helped in part by the depreciation of the Polish Zloty. The economy is the sixth biggest in Europe and in the top twenty five countries ranked by GDP. Steady progress in lifting relative incomes per capita towards the EU28 average has helped to grow the size of the middle-class consumer sector - a big opportunity for British businesses looking to invest in the country.read more...»
Worries are growing about some of the countries in the Euro zone slipping back into double dip recession. By convention, a recession is when national output (GDP) has fallen for two successive quarters. But this is far from being news. In a substantial number of economies, output is lower than it was not just two quarters ago, but three whole years ago, at the start of 2011.
The quarterly numbers have wobbled around up and down over this period, but they are now unequivocally below the 2011 figure in Greece, Ireland, Italy, Portugal and Spain. No surprises there. But the list goes on to include Finland, the Netherlands and the Czech Republic.read more...»
European countries are on average 12% richer a decade after they join the EU than they would otherwise be -- and the UK is 24% better off since joining the EU in 1973 than it would otherwise be. Those are among the findings of research by Nauro Campos, Fabrizio Coricelli and Luigi Moretti as written about on VoxEU.org.read more...»
In this short video report, Peter Spiegel, the Financial Times's Brussels bureau chief, recounts the moments in 2011 and 2012 when the euro came closest to collapse, and how politicians and bureaucrats battled over the solutions that eventually saved the euroread more...»
With the European Parliament elections on the near horizon there is plenty of discussion about the merits and de-merits of continued UK membership of the European Union.
The Centre for Economic Performance (CEP) has just launched a new report in its series of CEP Policy Analyses: ‘Brexit or Fixit? The Trade and Welfare Effects of Leaving the European Union’ by Gianmarco Ottaviano, Joao Paulo Pessoa, Thomas Sampson and John Van Reenen. Here are their main findings:read more...»
Imagine that, for some reason, you were forced to choose between having to read a long, turgid novel like Westward Ho or Middlemarch, or a book on the methodology of the national economic accounts. Most people, however reluctantly, would plump for the former. But the latter can at times be very exciting. A recent paper uses national accounts concepts to revolutionise the conventional view of world trade.read more...»
New data suggests that China will soon overtake the United States with the largest GDP adjusted for purchasing power parity. This short Financial Times video from Chris Giles looks at the new data which are being driven by fresh estimates of what money can buy - i.e. the volume of goods and services that are produced in different countries and what one dollar can buy in one country compared to another. The data finds that poorer countries are cheaper than economists thought they were and richer countries are more expensive.
China barely breaks into the top one hundred of the countries of the world in terms of GDP per capita (PPP) - it is a large country but not rich!
The 2011 gross domestic product (GDP) of the European Union, the United States and China together accounted for half of the world GDP in 2011. In 2011, the GDP of the 28-nations EU represented 18.6 percent of the world's GDP, expressed in Purchasing Power Standards (PPP). It was followed by the United States with a share of 17.1 percent and China with 14.9 percent.read more...»
Boston Consulting Group have produced a fascinating new report which investigates the competitiveness of the world's top 25 goods exporting nations. Their press release highlights significant changes in the world order over the last decade. The newly-minted BCG Global Manufacturing Cost-Competitiveness Index incorporates four factors: energy costs, productivity, wages and exchange rates. That analysis shows that Brazil is now one of the highest-cost countries, and the UK is the cheapest location in western Europe. Mexico now has lower manufacturing costs than China, while costs in much of eastern Europe are basically at parity with the U.S.read more...»
In the year to March 2014, consumer prices in Sweden fell by 0.4 per cent. This has prompted the central bank, the Riksbank, to abandon the normally cautious language used by such institutions. Over the same period, inflation was negative in a further seven European countries, such as Greece, Portugal and Spain. In eight other countries, inflation was still positive but very low, running at an annual rate of less than 0.5 per cent.
The Riksbank argues that these very low, often negative, rates of inflation are caused by a ‘very dramatic tightening’ of monetary policy. There is a definite risk of a slide into a prolonged depression similar to that of the 1930s.
Surely low inflation is a good thing? Well, up to a point.read more...»
This short streamed revision presentation looks at aspects of the EU including exam style question on the economic effects of labour migrationread more...»
Membership of the European Union (EU) has had a big positive effect on average incomes in all but one of its member countries. That is the central finding of research by Nauro Campos, Fabrizio Coricelli and Luigi Moretti, to be presented at the Royal Economic Society’s 2014 annual conference. They also find that the more financially developed countries have grown significantly faster after joining the EU.read more...»
The economics team at Deutche Bank have produced this infographic on aspects of the EU single market and it might be useful for A2 students wanting extra background on the EU economyread more...»
Showing critical awareness of economic statistics is an important skill for all economists.
A hat-tip to Fiona Quiddington for this article on youth unemployment from the Telegraph which analyses youth unemployment figures with a more critical eye.read more...»
On 31 January 1990, a great event took place in Pushkin Square, Moscow. A branch of MacDonald’s was opened. The same excitement was generated in Kiev on 24 May 1997, when the MacDonald’s franchise was extended to the Ukraine. The American author Thomas Friedman wrote in 1999 that no two countries with such a franchise had ever gone to war with each other. It is a striking and imaginative image, which rapidly spread to become part of the received wisdom of the chattering classes. If economic prosperity could become spread more widely across the world, liberalism and tolerance would follow.read more...»
The Atlas of Economic Complexity is a new book (perfect for the coffee table) from Richard Hausmann and Cesar Hidalgo. It maps out the degree of complexity of individual economies around the world and provides a hugely visual and interesting insight into the importance of knowledge in shaping the future prosperity of countries in the global economy. I have put together a 10 question quiz on some of their key results - a useful activity I hope for students interested in the commodity composition of trade of developed and developing countries. Have a go!read more...»
In the 1990s and early 2000s, Germany was seen by many as the new ‘Sick Man of Europe’. Between 1991 and 2005, GDP growth averaged only 1.2 per cent a year, compared to 3.3 per cent in the UK. Since then, the German economy has revived dramatically. The recovery in the German cluster of economies from the financial crisis has been as strong as in the United States, with the previous peak level of output being regained in 2011. Germany itself experienced virtually no increase in unemployment in 2008 and 2009, its exports are at record levels, and even the crisis in the Euro area has not prevented expansion in both output and employment.read more...»
Gains from international trade, the history of European economic integration, fiscal and monetary policy, the launch of the €uro and the 2008 financial crisis are all clearly animated and explained in this superb video. In just over 12 minutes it explains the problems of the €urozone and the threats and challenges it still faces. Definitely one to watch for the closing stages of an A2 macro course.read more...»
Norway has for many years recorded an enviable macroeconomic performance. It regularly tops the international rankings for the Human Development Index (HDI) and it has one of the highest figures for GNI per capita (PPP) among developed nations. It records huge current account surpluses in excess of 10% of GDP each year and strong growth and surging revenues from oil and gas production have given the Norwegian government a fiscal position that many other countries would die for! Unemployment is the lowest of any European country.
That said there are some signs that the economy is suffering from an over-dependence on oil and gas - it is at risk of the Dutch Disease?
The Dutch Disease is the idea that economic growth from exploiting and exporting natural resources can crowd out investment in other sectors, in part due to a strengthening exchange rate which causes a sharp rise in relative unit labour costs. High wages are also seen as a factor behind a trend decline in the average hours worked and a rise in the drop-out rate from high school education.
Manufacturing wages in Norway have climbed by more than 150 per cent since 1997 against just 50 per cent in the US and Germany They are now 60-70 per cent higher than the weighted average of Norway’s trading partners, meaning “that for every hour worked here we need to be 60 per cent more productive”. (FT, 7 Feb 2014)read more...»
Celebrations in Ireland as the credit ratings agencies no longer regard Irish government debt as ‘junk’, according to the BBC. What does this mean and why does it matter? Here are some bond market reminders and links, helping to explain how governments borrow, and at what cost.read more...»
Much has been made of Latvia's internal devaluation, so much so that it has featured in OCR's Global Economy pre release. Most commentators have reacted negatively to the effect of Latvia's internal devaluation; here's why:read more...»
Here are some notes taken from a talk given by Peter Coy, Economics Editor for Bloomberg Businessweek, at the Marshall Society Economics Conference in Cambridge in January 2015read more...»
Inside Story from Al Jazeerah considers whether the worst is now over for some of the cluster of Euro Area countries who have received huge bail-outs accompanied by fiscal austerity measures. The Spanish economy seems to be moving tentatively towards a stronger rebound despite persistently high mass unemployment.read more...»
Successful innovation is a driving dynamic of competitive businesses and countries. Bloomberg Rankings recently examined 215 countries and sovereign regions to determine their innovation quotient. They have narrowed this down to thirty countries and the results are available through this Bloomberg slideshow. Which nation comes first?read more...»
On the 1st January 2014, Latvia became the 18th country to enter the single currency Euro area, joining Estonia who adopted the Euro four years ago. How will it affect the economy? Are the forecast benefits greater than the costs and risks? Here are some resources on the issue:read more...»
The coming year looks like it will be a good one. At the start of each of the past five years, the economic scales have been tilted down, and the challenge has been to look for factors which might have tipped them back up. This year, the balance is reversed. The onus lies with the pessimists to prove their case. Not that there are any shortages on this score. For example, King Canute of Twickenham, aka Vince Cable, has solemnly commanded that house prices must stop rising, for fear of a new bubble.read more...»
Volume car production has been surging in recent years in many Eastern European countries - this FT news video provides some of the background and offers some revealing insights into the complex sources of competitive advantage in a key industrial sector.
The vehicles that roll off the production line at the Czech company's state-of-the-art car plant near Prague now outstrip many western rivals not only on cost but on reliability and finish too.read more...»
There has been huge recent coverage of the impending relaxation of migrant controls for workers from Romania and Bulgaria - two countries that joined the EU single market in 2007. Here are some different views on the issue.
The World Bank has recently put two short You Tube clips on their channel focusing on the importance of economies of scale, labour mobility and competitive cities as drivers of growth and development in Romania and Bulgaria. They are both worth a look as useful short revision clips for economists and geographers.read more...»
The June 2014 F585 case study focuses in part on Latvia's decision to join the Euro - this happens on 1st January 2014. One of Latvia's Baltic State neighbours Lithuanian is also hoping to join the single currency bloc in January 2015. Lithuania's finance minister explains to Richard Milne the Financial Times Nordic and Baltic correspondent, why the Baltic country is aiming for the euro.read more...»
The euro should either be dismantled in an orderly way or the leading members should do what is necessary to make it growth- and employment-friendly as fast as possible. That is the central message of Nobel laureate Professor Sir Christopher Pissarides, when he delivers his inaugural lecture as the first Regius Professor of Economics at the London School of Economics.
Professor Pissarides was once a passionate believer in the benefits of European monetary union. He now thinks that either the euro should be dismantled or the direction of economic policy dramatically reversed so as to promote growth and jobs and avoid creating a lost generation of educated young people.
‘We will get nowhere plodding along with the current line of ad hoc decision-making and inconsistent debt-relief policies’, he will say. ‘The policies pursued now to steady the euro are costing Europe jobs and they are creating a lost generation of educated young people. This is not what the founding fathers promised.’
The co-recipient of the 2010 Nobel Memorial Prize in Economic Sciences will outline what needs to be done to bring Europe back to life:read more...»
Here is a revision presentation on the economics of producer and consumer subsidies as forms of government intervention in markets. There are a number of up to date examples highlighted together with an evaluation of the benefits and costs of subsidy payments. This is designed as a revision aid for unit 1 students taking their microeconomics papers.read more...»
It isn’t supposed to be like this. The 'upside' of the recession and financial crisis was a steep depreciation in the value of sterling. That should have made our exports cheaper and imports dearer, thereby helping the UK to close its huge current account deficit. But as the graph above shows, it just hasn’t happened.read more...»
The numbers are breath-taking and they reflect the growing scale and prominence of Gulf air carriers in the international aviation market. Emirates, Etihad and Qatar Airways together have just ordered over 200 of new Boeing 777X aircraft, a more fuel-efficient version of the 777 jumbo. Here we have the monopsony power of major buyers coming face to face with the duopolistic market power of the dominant aircraft manufacturers - US plane maker Boeing, and European rival Airbus.
Check out our revision notes on monopsony power using the link belowread more...»
Long term youth unemployment is a persistent structural problem for the British economy - this BBC news article provides a ray of hope as Nestle announces extra investment in their training / apprenticeships schemes for younger workers. A more pro-active approach from larger businesses would be welcome - offering paid experience to help break the catch-22 of no job without experience, no experience without a job. Nearly one million young people (16-24) are unemployed in the UK, while youth unemployment in Ireland is 28 per cent with more than 65,000 young people out of work.read more...»
UK immigrants who arrived since 2000 are less likely to receive benefits and less likely to live in social housing than UK natives. What’s more, over the decade from 2001 to 2011, they made a considerable positive net contribution to the UK’s fiscal system, and thus helped to relieve the fiscal burden on UK-born workers.
The positive contribution is particularly evident for UK immigrants from the European Economic Area (EEA – the European Union plus three small neighbours): they contributed about 34% more in taxes than they received in benefits over the period 2001-11.
These are the central findings of a comprehensive analysis of the fiscal consequences of immigration to the UK, published today by the Centre for Research and Analysis of Migration (CReAM) at University College London.read more...»
The Confederation of British Industry has today launched a report called Our Global Future: The Business Vision for a Reformed EU - The report calls for further EU reform not least the completion of the single market in particular in services and the new internet economy. They argue for more free trade deals with other countries and regions.
The report produces estimates – based on past academic studies – that EU membership adds £62bn-£78bn a year to UK gross domestic product, equal to the combined economies of northeast England and Northern Ireland. That works out at £3,000 per household and £1,225 per individual. The fact sheets from the report can be found hereread more...»
In a recent assignment, A2 students were asked to write a 500 word profile on each of two development economists of their choice and to capture their key ideas and connect to one or more current issues in development. I will be adding some of their responses to the economics blog. Here Ben Evans focuses on the work of Daron Acemogluread more...»
A revision presentation on aspects of the links between investment and economic growth. Plus some slides on the causes of the so-called Middle Income Trapread more...»
Here at Tutor2u we are really looking forward to the launch of a new programme on BBC - Talking Business with Linda Yueh. Linda has spoken at several of our Tutor2u events in recent years and her ability to communicate important and often complex ideas to a wider public has been clearly evident in her presentations. This is a programme well worth tuning into and sharing with your students. Click here for details. See also: China's Transformation - The Long View (Linda Yueh at the Tutor2u Conference)
Economics student Anthony Beaumont writes on the policies that might sustain an improvement in the Croatian economy as it settles into being the 28th member nation of the EU single marketread more...»
The rate of unemployment in Greece has reached a record of just under 28% of the labour force. To put this into context, in 2008 just before the Global Financial Crisis engulfed much of the EU economy in recession, Greek unemployment was 7.8% (equivalent to where the UK jobless rate is today). Youth unemployment is staggeringly high - the latest figures show that 58.8% of people under the age of 25 are out of work.
There are some tentative signs that the Greek economy may be at a turning point from the trough of a deep and persistent depression. After six years of full-blown recession some macro indicators suggest that confidence is seeping back for businesses and consumers and that the government debt crisis might ease a little. Tourism, which accounts for about a fifth of Greece's economic output and one in five jobs is having a strong year - tourism exports represent an injection in the Greek economy's circular flow of income and spending. Chinese tourists seem to be coming to Greece in much greater numbers!
But Greece has suffered gravely over the last few years - the level of real GDP is 25% lower than it was before the crisis and some economists have started to refer to Greece as a sub-merging economy whose trend growth rate is now negative.read more...»
With a deep recession and persistently high rates of unemployment among younger people. fears are growing about a brain drain in Portugal as highly qualified university graduates leave the country in search of a better life. Peter Wise, Financial Times Lisbon correspondent, reports on what the trend means for the troubled Portuguese economy. Losing "the best of a generation" poses important long-term threats to the competitiveness of the Portuguese economy. Some are moving to Angola and Brazil, the UK has also attracted skilled workers in health care, banking and IT.read more...»
Tomorrow the UK will see its newest High Street bank open 631 branches. However, this new bank will be called the TSB (Trustee Savings Bank) which is a brand that was first created over 200 years ago. The creation of the bank comes from EU directives to split up the Lloyds TSB group and create greater competition in the banking market and counteract any advantage Lloyds TSB might have from being Government-owned.
This link will take you to a short Powerpoint stimulus presentation to be used in class. The presentation gives a brief explanation of the TSB story and has links to a few interesting video clips as well as the branch finder web page so that you can show your students where their nearest TSB is located.