fredag 22 maj 2009

2 förlorade år till

Här är en länk till och sammanfattning av en uppsats om hur stor minskningen av den ekonomiska potentialen blir pga en finanskris.

I all korthet säger den att en djup finanskris sänker trenden eller potentialen med 4 procent (obs, det här är förstås bara ett slags snitt och alla kriser är egentligen unika), [en riktigt djup kanske med ännu lite till]. Det motsvarar ungefär 2 års real tillväxt FÖRUTOM de år och vinster man redan förlorar under själva krisen. I mina ögon har marknaden både missat djupet av den pågående krisen och takten i återhämtningen (2 extra förlorade år). Därmed ska börsen också stå t.ex. 10+10+10=30% lägre.


MYCKET NÖJE:

"The effect of financial crises on potential output: new empirical evidence from OECD countries"

"Abstract: The aim of this paper is to assess the impact of financial crises on potential output. For this purpose a univariate autoregressive growth equation is estimated on an unbalanced panel of OECD countries over the period 1960 to 2007. Our results suggest that the occurrence of a financial crisis negatively and permanently affects potential output. In particular, financial crises are estimated to lower potential output by around 1.5 to 2.4% on average. The magnitude of the effect increases with the severity of the crisis. The occurrence of a deep crisis is found to decrease potential output by nearly 4%, almost twice the amount observed for the average of crises. These results are robust to the use of an alternative measure of potential output, changes in the methodology and in the sample periods."

Excerpt: "Expected effects of crisis on potential output A financial crisis can impact potential output through various direct and indirect channels. Direct effects are visible on all the elements of the production function, namely labour and capital inputs and total factor productivity: -

Financial crises lower incentives to invest in capital by decreasing demand for products and raising uncertainty on investment returns and risk premia (Pindyck, 1991; Pindyck and Solimano, 1993). In addition, firms may have to cope with less advantageous investment financing conditions due to tighter lending standards in the form of an increasing real cost of borrowing and/or limited credit supply.

- By weakening the labour market situation, financial crises can lead to an increase in the structural unemployment rate, through hysteresis effects (Ball, 2009). This is particularly the case for economies with rigid labour market institutions. Interaction between institutions can accentuate the rise in the structural unemployment (Blanchard and Wolfers, 2000; Bassanini and Duval, 2006).

- The effect of crises on labour force participation rates is in theory ambiguous, as two competiting effects are at play. Indeed, the loss of income can encourage second-income earners to look for a job and to enter the labour force (additional worker effect). At the same time, the high unemployment rate may discourage workers to search for a new position (discouraged worker effect). Some of them will exit the labour force to invest in human capital accumulation (Martin and Roger, 1997 and 2000). Evidence from the literature suggests that discouraged worker effect can be significant (Pichelman and Elmeskov, 1993), although there is also evidence that the encouraged worker effect can be also important, in particular for females (Debelle and Vickery, 1998).

- The effect on total factor productivity is a priori uncertain. On the one hand, spending in innovation is procyclical and is likely to be massively reduced at times of crisis, lowering total factor productivity. Higher risk premia are also likely to affect R&D spending. On the other hand, firms may have stronger incentives to restructure and/or improve their x-efficiency in periods of crisis to limit their losses.

In addition, a financial crisis can change potential output through indirect effects. Indeed crises usually trigger policy responses from public authorities to cushion the economic downturn (Reinhart and Rogoff, 2009). Stabilisation policies can sometimes have long-term effects. On the one hand, investment in infrastructure is likely to boost potential output. On the other hand, other policies can be detrimental to long-term growth when they introduce distortions or encourage excessive risk-taking. At the same time, temporary fiscal measures can lead to permanent increase in government size and in debt levels, which in turn will have negative effects on growth (Afonso and Furceri, 2008). Finally, the final impact of policies depends on the nature and the design of the specific measures. Financial crises can also foster the implementation of structural reforms that can in turn enhance potential output, by moderating political opposition to reforms (Høj et al., 2006).

Overall, the sign and the amplitude of the effect of financial crises on potential output is an empirical question. Given that the majority of mechanisms listed above are likely to reduce potential output, the suspicion is strong that the final effect will be negative. An approach based on events studies suggests that the evidence of the effect of crises on potential output is mixed (Haugh et al., 2009)."

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