Macroeconomic Policy and Financial Markets

Burning Growth: Rising Temperatures in a Growth-at-Risk Approach

A case study of Colombia. Macroeconomic Policy and Financial Markets master project by Camila Camilo, Angie Rozada, and Carlos Sanz ’22

Editor’s note: This post is part of a series showcasing Barcelona School of Economics master projects. The project is a required component of all BSE Master’s programs.

Abstract

The rise in global temperatures has been a growing source of concern for policy makers given its potential impact for sustainable economic activity.

This paper explores the effects of a temperature shock on the distribution of economic growth in Colombia. Specifically, we focus on the impact of these shocks on economic risks.

Our findings suggest the existence of asymmetries on the lower and upper tail of the distribution, indicating that higher temperatures leads to less optimistic outcomes for GDP growth. We also found negative and significant effects of temperature shocks on non-agricultural sectors.

The results are obtained using quantile regressions under the growth-at-risk (GaR) approach and local projections.

Temperature shocks on climate-exposed sectors

The analysis of the effects of temperature shocks on climate-exposed sectors suggest that several components of GDP are affected by increased heating.

Manufacturing activity seems to be negatively affected after a temperature shock, specially on the upper tail.
The entire distribution of construction shows a strong response to temperature shocks, suggesting that labor productivity could be severely affected by heat stress in this sector.
The generation of electricity by hydro-powers in Colombia could be explaining the negative effects on the energy sector after an increase in temperatures.
Results for agriculture are not statistically significant, possibly capturing the national attempt to increase resilience of this sector in Colombia.

Protecting Colombia’s economy from the impacts of global warming

Colombia has taken some steps in the mitigation and adaptation of its economy to rising temperatures. Especially, it has adopted the National Adaptation Program, whose principal objective is to reduce the country’s vulnerability and increase its response capacity to the impacts of global warming on economic growth, especially for the agricultural sector.

The findings for this sector and the mitigating measures adopted suggest that these efforts could reduce the country’s vulnerability to rising temperatures. However, the country should take complementary strategies with a broader scope of sectors such as energy and construction, that appear to be more vulnerable to warming.

For example, in the energy sector some of 18 the adaptation measures that could be taken are optimization of the conventional energies and improvement of efficiency and diversification of energy sources and promotion of renewal energy.

Further research

Further analysis about the channels and causes of the effects of temperature shocks on GDP growth could be done for a regional level. The heterogeneity on temperature levels and on the reliance on climate-exposed sectors across different regions in Colombia could imply differential effects depending the geographical area analyzed.

Read this paper in the online repository

Connect with the authors

Camila Camilo ’22 is a Division Chief at the Central Bank of the Dominican Republic in Santo Domingo, DR.

Angie Rozada ’22 is an Expert in the Financial Stability Department at Banco de la República (Central Bank of Colombia).

Carlos Sanz Pérez ’22 is a Trainee at the European Central Bank in Frankfurt, Germany.

Author info is current as of March 2023.

About the BSE Master’s Program in Macroeconomic Policy and Financial Markets

The role of pensions: Exploring the link between pension funds, monetary policy and economic performance

Macroeconomic Policy and Financial Markets master project by Diljá Matthíasardóttir and Lara Zarges ’21

A grandmother and granddaughter sit on a park bench talking happily about what they see on a mobile phone — Photo by Andrea Piacquadio on Pexels

Editor’s note: This post is part of a series showcasing Barcelona School of Economics master projects. The project is a required component of all BSE Master’s programs.

Abstract

Shocks to the European Central bank’s unconventional monetary policy trigger Dutch pension funds to search for yield: A structural VAR analysis shows that the pension funds reallocate their asset holdings from bonds towards equity and alternatives. The latter suggests the existence of a portfolio-rebalancing channel through institutional investors in the euro area. Moreover, we emphasize that the portfolio reallocation induced by monetary policy has increased the overall riskiness of the funds’ investments, which has potentially systemic risk implications. As the pension sector has evolved into a key player in the Dutch financial market, we additionally investigate the domestic real effects of a further increase in its size. In this context, a second SVAR approach shows that an expansive shock to total asset holdings boosts economic growth. As this link also works in the reverse direction, we point out the potential problems of a sudden dissaving of pension funds. Our results are of general interest for the aging societies in Europe as they improve the understanding of pension funds’ potential importance for economic policy in a period of demographic change. This paper hence urges future research to contribute to a better understanding of the link between demographic change, growing pension systems and central bank policies.

Conclusions

We infer that the change in the portfolio composition following a monetary shock to the ECB shadow rate after 2008 is driven by unconventional monetary policy succeeding in lowering the long-term interest rates. The resulting rise in equity and alternatives in the pension fund’s asset holdings can therefore be interpreted as evidence for the existence of a portfolio rebalancing transmission channel of quantitative easing in the euro area.

These findings also imply that due to unconventional monetary policy the riskiness of Dutch pension funds’ portfolios has been increasing gradually. Together with the sheer size of the Dutch pension sector and the funds’ tendency to herd-behavior this might be affecting local financial stability and with it the safety of Dutch pensions.

We further show that the size of the pension sector is a factor influencing economic growth and unemployment in the Netherlands.

Due to structural drivers such as demographic change, interest rates are likely to be lower for longer. We therefore stress the importance of future research on demographic effects such as the evolution of the size of funded pension systems on monetary policy conduction. This is e.g. important considering that the change of the Dutch pension system towards a full DC system in 2027 will most likely alter the consumption and saving patterns of citizens. The importance of bank deposits could shrink, impeding the supply of bank loans to the corporate sector. Firms would then likely turn towards financial securities to finance their operations. This would imply an overall decline in the importance of the credit channel for monetary policy transmission regardless of unconventional times. Therefore, a deeper understanding of the influence of central bank policies on institutional investors and insurers is required. This is especially important since the number of private, complementary pension schemes has been growing in many member states following the European Directive 2003/41/EC.

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Two Macro alumni publish in the same volume of European Economic Review

Publications by Nicolò Maffei-Faccioli ’15 and Alessandro Ruggieri ’12

The September 2021 volume of the journal European Economic Review includes two publications by alumni of the BSE Macroeconomic Policy and Financial Markets Program:

Does immigration grow the pie? Asymmetric evidence from Germany

by Nicolò Maffei-Faccioli ’15 (with Eugenia Vella)

We provide empirical evidence suggesting that net migration shocks can have substantial demand effects, potentially acting like positive Keynesian supply shocks. Using monthly administrative data (2006–2019) for Germany in a structural VAR, we show that the shocks stimulate vacancies, wages, house prices, consumption, investment, net exports, and output. Unemployment falls for natives (dominant job-creation effect), driving a decline in total unemployment, while rising for foreigners (dominant job-competition effect). The geographic origin of migrants and the education level of residents matter crucially for the transmission. Overall, the evidence implies that the policy debate should focus on redistributive strategies between natives and foreigners.

(Featured on this blog as a working paper last year)

Twin Peaks: Covid-19 and the labor market

by Alessandro Ruggieri ’12 (with Jake Bradley and Adam Hal Spencer)

This paper develops a choice-theoretic equilibrium model of the labor market in the presence of a pandemic. It includes heterogeneity in productivity, age and the ability to work from home. Worker and firm behavior changes in the presence of the virus, which itself has equilibrium consequences for the infection rate. The model is calibrated to the UK and counterfactual lockdown measures are evaluated. We find a different response in both the evolution of the virus and the labor market with different lockdown policies. A laissez-faire approach results in lives lost and acts as negative shock to the economy. A lockdown policy, absent any other intervention, will reduce the lives lost but increase the economic burden. Consistent with recent evidence, we find that the economic costs from lockdown are most felt by those earning the least. Finally, we introduce a job retention scheme as implemented by the UK Government and find that it spreads the economic hardship more equitably.

Connect with BSE authors

Nicolò and Alessandro are both alumni of the Barcelona School of Economics Master’s Program in Macroeconomic Policy and Financial Markets. They both got their PhDs from the IDEA Program (UAB and BSE).

Nicolò Maffei-Faccioli ’15 is a Senior Economist at Norges Bank.

Alessandro Ruggieri ’12 is an Assistant Professor at the University of Nottingham.

The Macroeconomics of Fighting Climate Change

Macroeconomic Policy and Financial Markets master project by Astrid Esparza Sánchez, Benedikt J. F. Höcherl, and Wei Liam Yap ’21

The full title of this project is “The Macroeconomics of Fighting Climate Change: Estimating the Impact of Carbon Taxes, Public and Private R&D Investment in Low-Carbon Technologies on the Scandinavian Economy.”

Editor’s note: This post is part of a series showcasing Barcelona School of Economics master projects. The project is a required component of all BSE Master’s programs.

Abstract

The worldwide lockdowns and slowdown of the global economy in the past two years induced a significant overall decrease in CO₂ emissions by 8.8% – the largest observed decrease since World War II. In that sense, COVID-19 emphasized the important trade-off between the emissions reductions necessary to fight climate change and economic welfare, which also constitutes a major political stumbling block to introducing policies aimed at halting climate change in normal times.

In order to further our understanding of this trade-off, we evaluate the macroeconomic impact of three policies that are commonly regarded as crucial to meeting national emissions targets:

Carbon taxes
Public Investment in low-carbon R&D
Private Investment in the R&D of low-carbon technologies, proxied by the number of patents for environmentally friendly applications

In our paper, we develop a novel approach to identifying the long-term impact of these policies using an Structural Vector Autoregression (SVAR) model. We use a Blanchard-Quah long-run identification scheme and a Cholesky short-run identification respectively to recover a one-standard deviation shock of carbon tax and low-carbon R&D, and investigate their impact on the evolution of GDP, employment and CO₂ emissions. In an extension, we include both public and private low-carbon R&D in an SVAR to uncover how public and low-carbon R&D incentivize and complement each other.

Conclusions

We evaluate the effect of carbon taxes, public low-carbon R&D and private low-carbon R&D on GDP, employment and CO₂ emissions in Finland, Norway, Denmark and Sweden. We find that carbon taxes do not significantly affect GDP and employment in the long run, but we also do not observe a significant reduction in CO₂ emissions. Our results might be shaped by the fact that the first carbon taxes were introduced in 1990 and consequently data is still relatively limited.

Furthermore, our results indicate a signiﬁcant negative eﬀect of public and private low-carbon R&D on emissions in Denmark and Finland. However, the eﬀect on GDP and employment is ambiguous and depends on the individual country.

To the best of our knowledge, this is a ﬁrst empirical indication of the relevance of R&D into low-carbon technologies in reducing CO₂ emissions in Northern Europe.

The implications of our result can fruitfully contribute to the debate about the adequate policy instruments for fighting climate change on at least three dimensions:

We find no evidence supporting the political concern that carbon taxes might negatively impact jobs and growth.
We provide evidence for the effectiveness of low-carbon R&D – public and private – in reducing CO₂ emissions. However, country specific crowding in and crowding out effects of public and private investment in low-carbon technologies should be taken into account when deciding for example on appropriate innovation policies.
Our paper underlines the idea that revenues from carbon taxes might potentially be employed for financing low-carbon R&D which in turn could spur long-run, emission free economic growth.

In any case, as for the planet time is of the essence, the Economics profession should focus ever more efforts on understanding the macroeconomics of climate change.

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Opening the Black Box of Austerity: Evidence from Fiscal Consolidation Plans

Alessandro Franconi ’17 (Macroeconomic Policy and Financial Markets)

In a new LUISS Working Paper, “Opening the Black Box of Austerity: Evidence from Fiscal Consolidation Plans,” Alessandro Franconi ’17 (Macro) explores the effects of austerity measures on labour markets and on income inequality and finds evidence of a mechanism that can mitigate the size of the economic contraction.

Paper abstract

This paper explores the effects of austerity measures on labour markets and on income inequality and finds evidence of a mechanism that can mitigate the size of the economic contraction. The results indicate that: (i) Fiscal consolidation causes greater distortions for the youth, hence they deserve a special attention to avoid severe long-term economic costs. (ii) While at first glance transfers cuts seem to be ideal, a careful examination suggests that these policies can jeopardise the success of fiscal consolidation. (iii) Tax hikes, negatively affecting the productive sector, trigger frictions in the labour market that give rise to recessionary effects. (iv) Spending cuts, targeting public sector wages and employment, can endanger the capabilities of the current and future labour force. (v) Lastly, income inequality increases with tax hikes and spending cuts, whereas the muted response to transfers cuts is explained by the reaction of labour demand.

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Alessandro Franconi ’17 is a PhD candidate in Economics at Luiss Guido Carli University. He is an alum of the Barcelona GSE Master’s in Macroeconomic Policy and Financial Markets.

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The Exploring Happiness Index

A new tool created by Elliot Jones ’18 (Macro Program)

Elliot Jones ’18 (Macroeconomic Policy and Financial Markets) is a Sovereign Credit Risk Analyst at the Bank of England. Together with co-creator Jessica Golding, he has established Exploring Happiness, a research organization that looks to bring produce evidence-based research in order to generate policy recommendations focused towards sustainably increasing wellbeing across all areas of society.

The latest project to come out of the initiative is the Exploring Happiness Index. This is an online tool that anyone can use to help them achieve their goals and to support their mental health.

Learn more about the index in the video and read on to find out how to start using it:

Explaining the concept of the index

Everyone is different and what makes each of us happy is also different. Some people are career-driven, others live for the social scene and some are highly family-orientated. Despite this, we all also have a lot in common – we all value our health, both mental and physical, the quality of our personal relationships matters a lot and we all like to have something to do that makes us feel worthwhile. It is these basic fundamentals that we use to build our index. We take evidence-based research on the main determinants of life satisfaction (which is taken as being synonymous with happiness) to bring together a group of components that we all have in common and these become the building blocks of the index.

Methodology

The differences of users are captured in two main ways – by identifying the circumstances and preferences of each user. When creating an account each user can choose from 13 different individual types such as an employed worker, a student or a retired person. As a result of this choice, the components that make up the index will change to reflect that individual types circumstances (e.g. an employed worker has a ‘Work’ component, a student has an ‘Education’ component and a retired person has neither of these, but greater weight is applied to their ‘Leisure Time’ component).

Next, users are then able to choose how important each of the components are to them and the weights in the index will shift to reflect these choices. These two steps make the index unique for each user.

Read the full methodology paper

Three benefits of using the index

Being informed: Our decisions, big or small, will play an important role in determining our happiness and we are more likely to make the right decision when we have better information available to draw upon. The usage of this index provides users with this information, perhaps meaning just knowing how happy you are could make you happier.
Mental health tool: Using this index allows users time to reflect, to think about what has been going well and what has been more challenging. There is good evidence available which points to the benefits of self-reflection on mental health. This has been shown for self-reflection in a number of forms (e.g. from expressive writing to gratitude journaling), across various life stages and as an effective treatment for those with diagnosed mental illnesses. Our view, which we intend to robustly test in the future, is that the method of self-reflection that this index requires will boost users resilience and mental wellbeing.
The ultimate tracker: Nowadays, it is not uncommon to track several parts of our lives, from steps to sleep to calories. But what’s the point in tracking these things? For most people, it’s because they believe if they do more steps or sleep better, they will end up feeling better. This index allows you to check whether that’s true in practice.

Get starting with the Exploring Happiness Index

You can create an account here or find out a little more first by heading to the index homepage.

If you have any feedback, please email info@exploringhappiness.co.uk or use the feedback form on our website.

Elliot Jones ’18 is a Sovereign Credit Risk Analyst at the Bank of England. He is an alum of the Barcelona GSE’s Master’s in Macroeconomic Policy and Financial Markets.

LinkedIn | Exploring Happiness

Institutional real estate investors, leverage, and macroprudential regulation

VoxEU article by Manuel A. Muñoz ’13 (Macroeconomic Policy and Financial Markets)

I am honoured to share my new VoxEU article (with you), which I believe it’s relevant for the ongoing debate on how to strengthen the macroprudential regulatory framework for nonbanks:

Ensuring that institutional real estate investors are subject to countercyclical leverage limits would be particularly effective in smoothing the housing price and the credit cycle.

Read the article on VoxEU

In addition, the associated ECB working paper suggests that this type of regulation would allow for rental housing prices to increase less abruptly during the boom, an issue that policymakers in several countries of the euro area have attempted to handle via price regulation (an alternative that could generate price distortions).

Also on VoxEU by Manuel A. Muñoz

Macroprudential policy and COVID-19: Restrict dividend distributions to significantly improve the effectiveness of the countercyclical capital buffer release (July 2020)

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Manuel A. Muñoz ’13 is Senior Lead Expert at the European Central Bank. He is an alum of the Barcelona GSE Master’s in Macroeconomic Policy and Financial Markets.

Are you a BSE alum with a new paper or project to share?
Learn how to submit your work to the Voice!

The Impact of Quantitative Easing on Sectoral Stock Prices in the Euro Area

Macroeconomic Policy and Financial Markets master project by Annalisa Goglione, Rahel Krauskopff, and Aditi Rai ’20

Editor’s note: This post is part of a series showcasing Barcelona School of Economics master projects. The project is a required component of all BSE Master’s programs.

Abstract

The Global Financial Crisis prompted central banks to adopt unconventional monetary policies such as the asset purchase programs. In our thesis, we analyze whether securities purchases carried out by the ECB have had an impact on stock prices and whether these effects vary across sectors. We decompose the central bank announcement surprises into two opposing effects, a pure monetary policy shock and an information shock. We find that the pure monetary policy shock has indeed significant effects on stock prices across all sectors, suggesting that controlling for the information shock is important when analyzing the effects of central bank announcements.

Conclusions

In our paper, we analyzed the effects of Quantitative Easing on stock prices in the Euro Area. Adding to previous literature, we not only analyzed the effect on the benchmark index but considered sectoral indices as well in order to allow for heterogeneous responses across different industries. Using the methodology of Altavilla et al. (2019), we first extracted the QE factor from each ECB press conference, starting from 2002. In a first exercise, we used the QE factor as a regressor to explain stock price changes on the press conference days. In line with asset pricing theory, we find negative effects of the QE shock on all sectoral stock price indices, yet, significance differs.

In a second step, we decomposed the shock into two components, using sign restrictions. The two shocks are referred to as information shock and pure monetary policy shock and are characterized by positive co-movement and negative co-movement of interest rates and stock prices, respectively.

We looked at these two components separately in order to assess whether insignificant results obtained in the overall regression may be due to the two components off-setting each other, a presumption which was confirmed. Furthermore, we find that the pure monetary policy shock has significant effects on stock prices across all sectors, while the information shock appears to be more important on specific sectors, which are more related to financial markets. A more in-depth analysis of the reasons for this heterogeneity could provide further insight into the effects of QE on stock prices. Moreover, repeating this exercise with a larger sample and intraday stock price data might yield improved results. Other extensions could be the analysis of specific sectors for various countries.

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Annalisa Goglione, Market Operations Trainee at ECB
Rahel Krauskopf, Microprudential Supervision Trainee at ECB
Aditi Rai, Global Investment Research – EM Strategy Intern at Goldman Sachs

About the BSE Master’s Program in Macroeconomic Policy and Financial Markets

The Asymmetric Unemployment Response of Natives and Foreigners to Migration Shocks

Working Paper by Nicolò Maffei Faccioli (Macro ’15 and IDEA) and Eugenia Vella (Sheffield)

What is the macroeconomic impact of migration in the second-largest destination for migrants after the United States?

In this paper, we uncover new evidence on the macroeconomic effects of net migration shocks in Germany using monthly data from 2006 to 2019 and a variety of identification strategies in a structural vector autoregression (SVAR). In addition, we use quarterly data in a mixed-frequency SVAR.

While a large literature has analyzed the impact of immigration on employment and wages using disaggregate data, the migration literature in the context of macroeconometric models is still limited due to a lack of data at high frequency. Interestingly, such data is available for Germany. The Federal Statistical Office (Destatis) has been collecting monthly data on the arrivals of foreigners by country of origin on the basis of population registers at the municipal level since 2006. The figure below shows the net migration rate by origin.

Key takeaways

Migration shocks are persistently expansionary, increasing industrial production, per capita GDP, investment, net exports and tax revenue.

Our analysis disentangles the positive effect on inflation of job-related migration from OECD countries from the negative effect of migration (including refugees) from less advanced economies. In the former case, a demand effect seems prevalent while in the latter case, where migration is predominantly low-skilled and often political in nature (including refugees), a supply effect prevails.

In the labor market, migration shocks boost job openings and hourly wages. Unemployment falls for natives, driving a decline in total unemployment, while it rises for foreigners (see figure below). Interestingly, migration shocks (blue area in the first row) play a relevant role in explaining fluctuations in industrial production and unemployment of both natives and foreigners, despite the bulk of these being explained by other shocks (red area in the first row), like business cycle and domestic labor supply.

We also shed light on the employment and participation responses for natives and foreigners. Taken together, our results highlight a job-creation effect for natives and a job-competition effect for foreigners.

Conclusion

The COVID-19 recession may trigger an increase in migration flows and exacerbate xenophobic sentiments around the world. This paper contributes to a better understanding of the migration effects in the labor market and the macroeconomy, which is crucial for migration policy design and to curb the rise in xenophobic movements.

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Niccolò Maffei-Faccioli ’15 (Macroeconomic Policy and Financial Markets) is a PhD candidate in Economics at Universitat Autònoma de Barcelona and Barcelona GSE (IDEA).
Eugenia Vella is a Lecturer at University of Sheffield.

About the BSE Master’s Program in Macroeconomic Policy and Financial Markets

Responding to COVID-19 by prioritising sustainability and wellbeing in the recovery

Elliot Jones ’18 (Macro) and Maximilian Magnacca Sancho ’21 (incoming ITFD)

Maximilian and Elliot connected through social media due to the Barcelona GSE connection and started working together on this piece due to shared research interests.

The COVID-19 pandemic is changing the way that we live our lives. As time passes it is becoming apparent that even once the lockdown policies have been eased and some level of normality has been resumed, the new world that we live in will be different to the one we knew before. This article focuses on emerging trends within the UK that have largely taken place as a result of COVID-19, or in some cases the pandemic has simply accelerated a trend that was already occurring. We then look to offer a range of public policy solutions for the recovery period where the overarching objective is to increase wellbeing in society in a sustainable way. These are focused towards the UK but several could be paralleled to other advanced economies.

chart — Chart 1. Consumer spending in April 2020 by category, % change year-on-year

But first, before we get to the policy solutions, briefly, what have been the main economic and wellbeing effects that we have seen as a result of COVID-19? In 2020, it is expected that the fall in overall economic output is going to be larger than during the financial crisis in 2008. Much of this is due to the level of decline in economic activity as a result of the UK governments lockdown policy. This was a necessary decision in order to reduce the spread of the virus and ensure the health service still has capacity to treat those that have unfortunately caught the disease. However, it has led to a significant liquidity shock for both households and businesses. Large portions of the labour market are now out of work and levels of consumer spending have declined rapidly (Chart 1). Alongside sharp falls in measures of economic performance, measures of wellbeing have declined rapidly as well (Chart 2). Increases in measures of uncertainty have mirrored increases in anxiety. While, social distancing policies are having a large impact on measures of happiness.

The UK government responded to the shock posed by COVID-19 with a range of policy interventions to provide funding to those that have been most impacted. At a macro level, the long-lasting effects of this crisis will be more pertinent if economic activity does not respond quickly after the government’s schemes have ended. Large portions of UK businesses have limited cash reserves to fall back on in a scenario where demand remains subdued for some time. However, even if the recovery period is strong there will still have been some clear winners and losers during this crisis. Younger workers, those on lower incomes and those with atypical work contracts are the ones that have been most heavily impacted (Chart 3). Whilst those on higher incomes, that are more likely to be able to work from home, have increased their household savings during this period, due to less opportunities to consume.

The policy solutions outlined below aim to be complementary of one another and look to amplify observed trends that are positive for wellbeing and to provide intervention where trends have been negative for wellbeing:

Climate at the centre of the response: This is less a policy recommendation and more a theme for the response. However, our message here is that increased public spending projects, focused towards green initiatives should be combined with a coherent carbon tax policy which influences incentives and helps to support the UK’s transition to a low carbon economy.
Labour market reforms: The government should look to develop a centralised job retraining and job matching scheme that supports workers most impacted by COVID-19, helps to encourage structural transformation towards emerging industries and increases the amount of highly skilled workers in the UK workforce.
Tough decisions on business: Some businesses will require further assistance from the UK government in the form of equity funding, rather than the debt funding seen so far. This should be done on a conditional basis, requiring all these businesses to comply with the UK’s climate objectives and should only be provided to businesses in industries that are expanding or strategically important to the UK economy.
Modernising the regions on a cleaner, greener and higher level: Looking to build on the governments ‘levelling up the regions’ policy to reduce regional inequalities, our policy consists of government funded infrastructure policies that include green investments for regions outside of the UK’s capital.
Harbouring that rainbow effect: Building on the increased community spirit that has been observed during the pandemic, this policy solution looks to increase localised community funding to maintain social cohesion and support those with mental health issues.

Lastly, as the policy recommendations focus on expanding public investment to support the recovery, it is important to consider what this means for public debt sustainability in the UK. The conclusion is that as a result of the low interest rate environment, the most efficient way out of this recession is to borrow and spend on projects that will increase resilience to future shocks and support the UK’s transition to a low carbon economy.

Please click on the link below to read about this in more detail. Comments are welcome.

Read the full article

Full article originally posted on Exploring Happiness.

Elliot Jones ’18 is a Sovereign Credit Risk Analyst at the Bank of England. He is an alum of the Barcelona GSE’s Master’s in Macroeconomic Policy and Financial Markets.

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Maximilian Magnacca Sancho ’21 is an incoming student in the Barcelona GSE Master’s in International Trade, Finance, and Development.

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