On Secular Stagnation in the Industrialized World

We argue that the economy of the industrialized world taken as a whole is currently – and for the foreseeable future will remain – highly prone to secular stagnation. But for extraordinary fiscal policies, real interest rates would have fallen much more and be far below their current slightly negative level, current and prospective inflation would be further short of the two percent target levels and past and future economic recoveries would be even more sluggish. We start by arguing that, contrary to current practice, neutral real interest rates are best estimated for the bloc of all industrial economies given capital mobility between them and relatively limited fluctuations in their aggregated current account. We show, using standard econometric procedures and looking at direct market indicators of prospective real rates, that neutral real interest rates have declined by at least 300 basis points over the last generation. We argue that these secular movements are in larger part a reflection of changes in saving and investment propensities rather than the safety and liquidity properties of Treasury instruments. We highlight the observation that levels of government debt, the extent of pay-as-you-go old age pensions and the insurance value of government healthcare programs have all ceteris paribus operated to raise neutral real rates. Using estimates drawn from the literature, as well as two general equilibrium models emphasizing respectively life-cycle heterogeneity and individual uncertainty, we suggest that the “private sector neutral real rate” may have declined by as much as 700 basis points since the 1970s

Understanding the macroeconomic effects of working capital in the United Kingdom

In this paper we first document the behaviour of working capital over the business cycle stressing the large negative effect of the recent credit contraction on UK firms working capital positions. In order to understand the effects of working capital on macroeconomic variables, we solve and calibrate an otherwise standard flexibleprice DSGE model that introduces an explicit role for the components of working capital as well as a banking sector which intermediates credit. We find that financial intermediation shocks, similar to those experienced post-2007, have persistent negative effects on economic activity ; these effects are reinforced by reductions in trade credit. Our model admits a crucial role for monetary policy to offset such shocks. Key words: Working capital ; business cycle model ; spreads ; financial crisis. JEL classification: E20 ; E51 ; E52

Secular drivers of the global real interest rate

Long-term real interest rates across the world have fallen by about 450 basis points over the past 30 years. The co-movement in rates across both advanced and emerging economies suggests a common driver: the global neutral real rate may have fallen. In this paper we attempt to identify which secular trends could have driven such a fall. Although there is huge uncertainty, under plausible assumptions we think we can account for around 400 basis points of the 450 basis points fall. Our quantitative analysis highlights slowing global growth as one force that may have pushed down on real rates recently, but shifts in saving and investment preferences appear more important in explaining the long-term decline. We think the global saving schedule has shifted out in recent decades due to demographic forces, higher inequality and to a lesser extent the glut of precautionary saving by emerging markets. Meanwhile, desired levels of investment have fallen as a result of the falling relative price of capital, lower public investment, and due to an increase in the spread between risk-free and actual interest rates. Moreover, most of these forces look set to persist and some may even build further. This suggests that the global neutral rate may remain low and perhaps settle at (or slightly below) 1% in the medium to long run. If true, this will have widespread implications for policymakers — not least in how to manage the business cycle if monetary policy is frequently constrained by the zero lower bound

Design and implementation of the price cap on Russian oil exports

Basic economics teaches that price caps are bad – limiting the price of a good distorts demand and discourages producers from supplying the market. So why did the Biden Administration, led by Janet Yellen, the consummate economist, champion a price cap on oil from Russia after it invaded Ukraine in 2022? The answer is that this price cap, implemented for crude oil in December 2022 and oil products in February 2023, differs significantly from the standard cap discussed in introductory economics classes. This paper explains these differences and describes the first six months this policy has been in existence. We provide background on Russian oil trade and describe the goals, structure, enforcement and economics of the price cap. We review the main concerns and contrast them with the outcomes observed to date

The impact of the financial crisis on supply

Output fell sharply in the United Kingdom during the recent global financial crisis, some of which is likely to have reflected a contraction in the economy’s supply capacity. This article considers the impact of financial crises on supply and the potential channels through which supply may have been affected during the recent recession. It is likely that the downturn has resulted in a fall in companies’ effective supply capacity although the magnitude of that impairment is difficult to gauge.

Links between problem gambling and spending on booster packs in collectible card games : a conceptual replication of research on loot boxes

Loot boxes are digital containers of randomised rewards present in some video games which are often purchasable for real world money. Recently, concerns have been raised that loot boxes might approximate traditional gambling activities, and that people with gambling problems have been shown to spend more on loot boxes than peers without gambling problems. Some argue that the regulation of loot boxes as gambling-like mechanics is inappropriate because similar activities which also bear striking similarities to traditional forms of gambling, such as collectable card games, are not subject to such regulations. Players of collectible card games often buy sealed physical packs of cards, and these ‘booster packs’ share many formal similarities with loot boxes. However, not everything which appears similar to gambling requires regulation. Here, in a large sample of collectible card game players (n = 726), we show no statistically significant link between in real-world store spending on physical booster and problem gambling (p = 0.110, η2 = 0.004), and a trivial in magnitude relationship between spending on booster packs in online stores and problem gambling (p = 0.035, η2 = 0.008). Follow-up equivalence tests using the TOST procedure rejected the hypothesis that either of these effects was of practical importance (η2 > 0.04). Thus, although collectable card game booster packs, like loot boxes, share structural similarities with gambling, it appears that they may not be linked to problem gambling in the same way as loot boxes. We discuss potential reasons for these differences. Decisions regarding regulation of activities which share structural features with traditional forms of gambling should be made on the basis of definitional criteria as well as whether people with gambling problems purchase such items at a higher rate than peers with no gambling problems. Our research suggests that there is currently little evidence to support the regulation of collectable card games

Modeling Fuzzy Fidelity: Using Microsimulation to Explore Age, Period, and Cohort Effects in Secularization

This article presents a microsimulation that explores age, period, and cohort effects in the decline of religiosity in contemporary societies. The model implements a well-known and previously empirically validated theory of secularization that highlights the role of “fuzzy fidelity,” i.e., the percentage of a population whose religiosity is moderate (Voas 2009). Validation of the model involved comparing its simulation results to shifts in religiosity over 9 waves of the European Social Survey. Simulation experiments suggest that a cohort effect, based on weakened transmission of religiosity as a function of the social environment, appears to be the best explanation for secularization in the societies studied, both for the population as a whole and for the proportions of religious, fuzzy, and secular people

Economic evaluation of a community-based diagnostic pathway to stratify adults for non-alcoholic fatty liver disease: a Markov model informed by a feasibility study

Objectives: To assess the long-term cost-effectiveness of a risk stratification pathway, compared with standard care, for detecting non-alcoholic fatty liver disease (NAFLD) in primary care. Setting: Primary care general practices in England. Participants: Adults who have been identified in primary care to have a risk factor for developing NAFLD, that is, type 2 diabetes without a history of excessive alcohol use. Intervention: A community-based pathway, which utilises transient elastography and hepatologists to stratify patients at risk of NAFLD, has been implemented and demonstrated to be feasible (NCT02037867). Earlier identification could mean earlier treatments, referral to specialist, and enrolment into surveillance programmes. Design: The impact of earlier detection and treatment with the risk stratification pathway on progression to later stages of liver disease was examined using decision modelling with Markov chains to estimate lifetime health and economic effects of the two comparators. Data sources: Data from a prospective cross-sectional feasibility study indicating risk stratification pathway and standard care diagnostic accuracies, were combined with a Markov model that comprised the following states: no/mild liver disease, significant liver disease, compensated cirrhosis; decompensated cirrhosis, hepatocellular carcinoma, liver transplant and death. The model data were chosen from up-to-date UK sources, published literature and an expert panel. Outcome measure: An incremental cost-effectiveness ratio (ICER) indicating cost per quality adjusted life year (QALY) of the risk stratification pathway compared with standard care was estimated. Results: The risk stratification pathway was more effective than standard care, and cost ￡2,138 per QALY gained. The ICER was most sensitive to estimates of the rate of fibrosis progression and the effect of treatment on reducing this, and ranged from -￡1,895 to ￡7,032/QALY. The risk stratification pathway demonstrated an 85% probability of cost-effectiveness at the UK willingness-to-pay threshold of ￡20,000/QALY. Conclusions: Implementation of a community-based risk stratification pathway is likely to be cost effective

Cost-effectiveness of a specialist geriatric medical intervention for frail older people discharged from acute medical units: economic evaluation in a two-centre randomised controlled trial (AMIGOS)

Background Poor outcomes and high resource-use are observed for frail older people discharged from acute medical units. A specialist geriatric medical intervention, to facilitate Comprehensive Geriatric Assessment, was developed to reduce the incidence of adverse outcomes and associated high resource-use in this group in the post-discharge period. Objective To examine the costs and cost-effectiveness of a specialist geriatric medical intervention for frail older people in the 90 days following discharge from an acute medical unit, compared with standard care. Methods Economic evaluation was conducted alongside a two-centre randomised controlled trial (AMIGOS). 433 patients (aged 70 or over) at risk of future health problems, discharged from acute medical units within 72 hours of attending hospital, were recruited in two general hospitals in Nottingham and Leicester, UK. Participants were randomised to the intervention, comprising geriatrician assessment in acute units and further specialist management, or to control where patients received no additional intervention over and above standard care. Primary outcome was incremental cost per quality adjusted life year (QALY) gained. Results We undertook cost-effectiveness analysis for 417 patients (intervention: 205). The difference in mean adjusted QALYs gained between groups at 3 months was -0.001 (95% confidence interval [CI]: -0.009, 0.007). Total adjusted secondary and social care costs, including direct costs of the intervention, at 3 months were £4412 (€5624, $6878) and £4110 (€5239,$6408) for the intervention and standard care groups, the incremental cost was £302 (95% CI: 193, 410) [€385, $471]. The intervention was dominated by standard care with probability of 62%, and with 0% probability of cost-effectiveness (at £20,000/QALY threshold). Conclusions The specialist geriatric medical intervention for frail older people discharged from acute medical unit was not cost-effective. Further research on designing effective and cost-effective specialist service for frail older people discharged from acute medical units is needed

Fusion of heterogenous sensor data in border surveillance

Wide area surveillance has become of critical importance particularly for border control between countries where vast forested land border areas are to be monitored. In this paper we address the problem of the automatic detection of activity in forbidden areas, namely forested land border areas. In order to avoid false detections, often triggered in dense vegetation with single sensors such as radar, in this paper we present a multi sensor fusion and tracking system using passive infrared detectors in combination with automatic person detection from thermal and visual video camera images. The approach combines weighted maps with a rule engine that associates data from multiple weighted maps. The proposed approach is tested on real data collected by the EU FOLDOUT project in a location representative of a range of forested EU borders. The results show that the proposed approach can eliminate single-sensor false detections and enhance accuracy by up to 50%