China is aiming to become a technological innovation powerhouse by 2050, with Premier Li Keqiang recently announcing an increase in R&D investments by 7% for the next five years. But greater R&D investment is no guarantee of success. This column examines the effects of R&D investments by Chinese firms on aggregate productivity and growth. The authors find that innovation plays
Rui Esteves, Seán Kenny, Jason Lennard 20 July 2021
There is little consensus on the macroeconomic impacts of sovereign debt crises, despite the regularity of such events. This column quantifies the aggregate costs of defaults using a narrative approach on a large panel of 50 sovereigns between 1870 and 2010. It estimates significant and persistent negative effects of debt crises starting at 1.6% of GDP and peaking at 3.3%, before reverting to trend five years later. In addition, underlying causes matter. Defaults driven by aggregate demand shocks result in short-term contractions, whereas aggregate supply shocks lead to larger, more persistent losses.
Nicola Gennaioli, Alberto Martin, Stefano Rossi
Ilan Noy
There is no discernible trade-off between health and GDP outcomes in 2020 (Figure 1). That s one unenviable choice governments were saved from having to make. The economic impact of COVID-19 was highly differentiated, it was not just driven inversely to health outcomes. Early GDP estimates suggest that except for a few fragile states, factors driving GDP in 2020 were the degree to which countries were hit by the global cessation of trade, travel, foreign direct investment, and the degree to which they had the policy space to offset a widespread economic shutdown (Arezki et al. 2021).
Figure 1 Economic decline in the second quarter of 2020 vs rate of confirmed deaths