It seems like it’s raining billions

Jérôme CreelXavier Ragot, and Francesco Saraceno

The second meeting of the Eurogroup did the trick. The Ministers of Finance, after having once again laid out their divisions on the issue of solidarity between euro area Member States on Tuesday 7 April 2020, reached an agreement two days later on a fiscal support plan that can be put in place fairly quickly. The health measures taken by the Member States to limit the spread of the Covid-19 pandemic will enjoy better short-term financing, which is good news. The additions to Europe’s tools for dealing with the crisis will be on the order of 500 billion euros – this is certainly not negligible, and note that this comes on top of the efforts already put in place by governments – but this corresponds mainly to a new accumulation of debt by the Member States. The net gain for each of them, as we shall see, is actually quite marginal.

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Does the fall in the stock market risk amplifying the crisis?

By Christophe Blot and Paul Hubert

The Covid-19 crisis will inevitably plunge the global economy into recession in 2020. The first available indicators – an increase in the unemployment rolls and in partial unemployment – already reveal an unprecedented collapse in activity. In France, the OFCE’s assessment suggests a 32% cut in GDP during the lockdown. This fall is due mainly to stopping non-essential activities and to lower consumption. The shock could, however, be amplified by other factors (including rises in some sovereign rates, falling oil prices, and capital and foreign exchange movements) and in particular by the financial panic that has spread to the world’s stock exchanges since the end of February.

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The Covid-19 passport and the risk of voluntary infection

By Gregory Verdugo

Covid-19 has made it risky to have a job that cannot be done remotely and requires contact with the public. Given the danger of infection facing frontline workers, employers confront the risk of legal consequences in the event of insufficient protection. This new risk could lead to changes in the characteristics of the workers being hired, as the threat of lawsuits creates an incentive to discriminate by choosing workers who are least at risk for these positions. As long as the Covid-19 virus is in circulation, we could therefore witness the rise of a powerful new source of discrimination in the labour market based on the risk of serious infection. But according to some epidemiologists, the virus could be circulating and creating episodic outbreaks for 18 to 24 months [1], with the result that Covid-19 could leave a lasting imprint on the job market.

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The essential, the useless and the harmful (part 3)

By Éloi Laurent

Is humanity a pest? For the other beings of Nature who find it increasingly difficult to coexist with humans on the planet, the answer is unambiguous: without a doubt.

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The essential, the useless and the harmful (part 2)

By Eloi Laurent

How do we know what we can do without while continuing to live well? To clarify this sensitive issue, economic analysis offers a central criterion, that of the useful, which itself refers to two related notions: use and utility.

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The essential, the useless and the harmful (part 1)

Éloi Laurent

The Covid-19 crisis is still in its infancy, but it seems difficult to imagine that it will lead to a “return to normal” economically. In fact, confinement-fuelled reflections are already multiplying about the new world that could emerge from the unprecedented conjunction of a global pandemic, the freezing of half of humanity, and the brutal drying up of global flows and the economic activity. Among these reflections, many of which were initiated well before this crisis, the need to define what is really essential to human well-being stands out: what do we really need? What can we actually do without?

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What do the fiscal stimulus strategies in the United States and Europe reveal?

By Christophe Blot and Xavier Timbeau

In parallel with the decisions taken by the US Federal Reserve and the European Central Bank (ECB), governments are stepping up announcements of stimulus packages to try to cushion the economic impact of the Covid-19 health crisis, which has triggered a recession on an unprecedented scale and pace. The confinement of the population and the closure of non-essential businesses is leading to a reduction in hours worked and in consumption and investment, combining a supply shock and demand shock.

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The transmission of monetary policy: The constraints on real estate loans are significant!

By Fergus Cumming (Bank of England) and Paul Hubert (Sciences Po – OFCE, France)

Does the transmission of monetary policy depend on the state of consumers’ debt? In this post, we show that changes in interest rates have a greater impact when a large share of households face financial constraints, i.e. when households are close to their borrowing limits. We also find that the overall impact of monetary policy depends in part on the dynamics of real estate prices and may not be symmetrical for increases and decreases in interest rates.

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Time for Climate Justice

By Eloi Laurent

On September 18th 2019, 16 years old climate activist Greta Thunberg appeared before the United States House of Representatives. When asked to submit a formal version of her inaugural statement, she replied that she would be giving lawmakers a copy of the IPPC special report on the impacts of global warming of 1.5 °C, the so-called “SR 1.5“. “I am submitting this report as my testimony because I don’t want you to listen to me, I want you to listen to the scientists”, she said eloquently.

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Are our inequality indicators biased?

By Guillaume Allègre

The issue of inequality is once again at the heart of economists’ concerns. Trends in inequality and its causes and consequences are being amply discussed and debated. Strangely, there seems to be a relative consensus about how to measure it [1]. Economists working on inequality use in turn the Gini index of disposable income, the share of income held by the richest 10%, the inter-decile ratio, and so on. All these measures are relative in character: If the income of the population as a whole is multiplied by 10, the indicator doesn’t change. What counts is the income ratio between the better off and the less well off. But could inequality and the way it changes be measured differently?

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