see also EcoTV Week

On the Same Theme

PMIs confirm the collapse in global economic activity 3/25/2020
The PMI indices published this week give an early insight into the scale of the economic shock from Covid-19. The composite indices for Japan (35.8), Germany (37.2), France (30.2), the UK (37.1) and the US (40.5) all slumped in March. The euro zone composite PMI was the lowest ever recorded at 31.4. The deterioration was particularly marked for the sub-indices relating to employment and orders for goods and services. Figures for April, whilst remaining at historically low levels, are expected to show increasing divergence between the regions. In East Asia, internal demand should start to pick up, as activity starts to normalise in China. Conversely, the epidemic is spreading more rapidly in the US, India and Africa; meanwhile, many European countries remain in lock-down.
The covid-19 epidemic economic consequences: pervasive uncertainty, delayed recovery 3/12/2020
The coronavirus epidemic represents a combination of a demand, a supply and an uncertainty shock. This has knock-on effects on the price of oil and on financial conditions which in turn should end up acting as an additional drag on growth. The huge drop in the price of oil following the absence of an agreement amongst the OPEC+ countries on further production cuts, makes this worse. It hits the producer countries, increases the financial pressure on energy companies, in particular those which are highly indebted, whereas the reaction on the demand side will be muted due to the epidemic and lack of visibility. The timid improvement of business survey data at the end of 2019 has been stopped. Recent data show a very significant deterioration in China, Hong Kong. Elsewhere, the reaction has, on the whole, been limited, but this is not expected to last. The big drop in the price of oil complicates matters further. The Federal Reserve is back in (aggressive) easing mode, the Bank of England has followed and the ECB is expected to ease as well. Several governments have taken various, very targeted policy measures. We should expect more is to follow. When the peak of the epidemic will have been passed and the international propagation halted, the rebuilding of inventories as well as some pent-up demand should support growth. A very accommodative monetary environment should also help. However, the timing of the recovery entirely depends on how he epidemic evolves.
The cryptocurrency economy 3/11/2020
Depending on the source, estimates of the number of ‘cryptocurrencies’ vary between 1,600 and 3,000. These crypto-assets struggle to fulfil the three economic functions of money, and so cannot be considered as such. Although their fairly modest uptake currently limits their economic impact, increased use could create risks in the transmission of monetary policy, money creation and financial stability. Several central banks are looking at the introduction of a ‘central bank digital currency’ (CBDC) in response to these challenges. However, far from being simply a substitute for private cryptocurrencies, these CBDCs would carry specific risks in terms of financial stability, most notably that of a ‘digital bank run’. We believe that their possible introduction, and the associated details, will require meticulous analysis.
Except for China and Hong Kong, little impact thus far of the coronavirus 3/6/2020
At the start of a new month, the purchasing managers indices are amongst the earliest data providing information on what happened the month before. Following the coronavirus outbreak they were even more eagerly awaited than normal. For the manufacturing sector, the picture is very mixed, with a considerable decline for the world index on the back of huge drops in China and Hong Kong. On the other hand, the index for the eurozone saw another increase, driven by Germany, the Netherlands, Spain and Greece with Italy remaining stable and France weakening. In the US, both the Markit PMI and the ISM index declined. Clearly, except for China and Hong Kong, the data do not yet show the impact of the coronavirus epidemic but it is only a matter of time for this to happen. To some degree this also applies to the services PMIs. For this sector, there were huge declines in China and Hong Kong. Japan weakened considerably, contributing to the decline of the world index. The eurozone was stable. The decline in the US is puzzling considering that the ISM non-manufacturing index improved.
The coronavirus: which role for economic policy? 3/6/2020
The Federal Reserve’s rate cut as well as promise of action by other central banks and finance ministers raise the question of how economic policy can react to the epidemic. The very nature of the shock makes monetary policy at first glance ill-equipped.
The coronavirus: international propagation and tail risks 2/28/2020
The international propagation of the coronavirus forces a rethink of the consequences for the global economy. Coming after the outbreak in China, the marginal impact on the global economy of the spreading of the epidemic should, a priori, be rather limited. Yet, financial markets have reacted very negatively. This jump in risk aversion reflects concern that the economic consequences may have been underestimated thus far as well as increased focus on tail risk. This ‘financial accelerator’ phenomenon may in turn contribute to the worsening of the growth outlook.
Central banks: current objectives and the issues they raise 2/26/2020
In this podcast, we look at central banks policy objectives, which sometimes differ. The ECB’s top priority is to meet its inflation target, whereas the Fed is targeting both inflation and full employment. These objectives raise several questions: how can we measure inflation and full employment? How do central banks set their targets? And what instruments can be used to attain them? We will also see how central banks must deal with a constantly changing economic environment.
Central banks: the trade-off between inflation and financial stability 2/26/2020
How to strike the right balance between inflation and financial stability has been a source of debate for decades. In this second podcast, William De Vijlder shows how the central banks give priority to inflation targets over financial stability. He uses a few examples to illustrate how central banks will opt to hold a steady course even when confronted with the risk of instability, which is often caused by financial market turmoil.
Central banks: Addressing the policy dilemma 2/26/2020
In the third podcast, William De Vijlder shows how a central bank’s persistently accommodating monetary policy to bring inflation in line with the target can have a negative impact over the long term, threatening both growth and financial stability. In case of a crisis, central banks no longer have much room to intervene, since they have used up their manoeuvring room in the pursuit of their inflation target.
Uncertainty: conflicting signals 2/21/2020
The data used to chart different measures of uncertainty do not yet take into account the impact of the coronavirus. With this caveat in mind, the signals nevertheless go in different directions...

ABOUT US Three teams of economists (OECD countries research, emerging economies and country risk, banking economics) make up BNP Paribas Economic Research Department.
This website presents their analyses.
The website contains 2369 articles and 603 videos