"Whatever it takes" may not be enough. (28th January 2020)

• Record Type: Journal Article
• Is Part Of: Economic outlook. Volume 44:Number 1(2020)
• Page Start: 21
• Page End: 25
• Publication Date: 2020-01-28
• Subjects: Economic forecasting -- Great Britain -- Periodicals; Great Britain -- Economic conditions -- 1945-1964 -- Periodicals; 330.94100112
• DOI: 10.1111/1468-0319.12464
• Languages: English
• ISSNs: 0140-489X

Abstract

Abstract : ▀ Concerns over risks to the global economy from actual and perceived limits to fiscal and monetary policy are well‐founded. A decade on from the global financial crisis, evidence highlights chronic demand deficiency, related weakness in supply and a prolonged period of underperformance among the most policy‐constrained advanced economies. All lie within the eurozone. ▀ To gauge the risks from such policy constraints, we model a broadening of the eurozone slowdown. Despite the ECB's commitment to mitigate adverse cyclical developments, we find that ‐ in the absence of significant accompanying fiscal support ‐ a period of protracted eurozone weakness would ensue. ▀ The implications are far‐reaching. Our analysis suggests that such a protracted eurozone slowdown would spill over globally, taking 0.4ppts off average global growth over the next five years.