Chuleta 2 GPE

2.-Covid crisis vs Financial crisis

1. Origins of the financial crisis: Main causes: low ir, huge savings from China and other Asian countries, self-fulfilling expectation, subprime mortgages, the Real Estate Bubble in the US whose burst led to a financial crisis. Consequences: signifcant asset prices decrease, stock market crash in 2008, financial and non-financial bankruptcies. The crisis affected the real economy of the world trough several channels: a collapse in internatinoal trade, poverty effects, loss of confidence in financial markets (liquidity restrctitions) and fall in AD. 2. Financial crisis Vs Covid crisis: Similarities: uncertainty and magnitude of effects, Differences: different transmission mechanisms and recovery path (covid much quicker due to automatic stabilizers). 1)Covid: first large supply component which resulted in contaction of demand. Quickly spread to the rest of the economy and very strong policy response. 2) Financial: first large supply demand compoonent, which resulted in contraction of supply. It gives place to subprime crisis, which resulted in poverty effects and a contration of AD. // Puchasing Managers Indecx (PMI): is an index of the current direction of the economic trends in the manufacturing sector. It captures wheter market conditions are expanding (PMI>50) or contracting (PMI<50=). it=”” is=”” constructed=”” using=”” monthly=”” survey=”” responses=”” from=”” supply=”” chain=”” managers=”” of=”” 19=”” industries.=””>50=).>3.Comparison of effects on production: large effects in both crisis in terms of output, larger effects for developed countries, this effects is more pronounced during the financial crisis and much less in the covid crisis, both crisis brought severe contractions in manufacturing and in covid larger effect in services.//4. Effects on unemployment: Financial: large unemployment effects. Covid: also imblaances but quicker recovery.// 5.Effects on CA imbalances: Big imbalances, future financial support but imbalances not predicted to last. //6.- Effects on trade: Reduction in international trade but why such a reduction: because of dependence on financing, global supply chains and distribution simultaneous fall in AD in multiple world zones, fall in consumption of durable goods and business investment. /7. Future Projections: Extreme poverty has increased, more poor people, inflation growing because the economy is reopening very fast, there are high energy prices that are pushing up inflation. Inflation is expected to go down over 2022 and supply to catch up with demand, energy prices may continue to rise.

3.-Population and migration

1.-Relationship of demographics and economics: economic changes cause demographic changes and vice-versa, they are both correlated and respond to common causes. 2.-World population: 1950:explosion of population, behind this phenomenon is the industrial revolution and the antiboiotics that fight against child diseases. Prediction: population is going to continue growing but other predictions say pupoulation is going to decrease, other that it is going to increase but at a lower rate. 3.-Urbanization: our future is urban




4.-Demographic transition: the model: Projection of the birth rate and death rate to converge around 2100. Birth rate decreasing since 1950 and still is,. // The demographic transition model: it is based on historical trends of birth rate and death rate. The model predicts that a countrys populaiton growth rate goes trough several stages as it develops. 1)Stage 1 (high stationary); 2) Stage 2 (early expanding); 3) Stage 3 (late expanding); 4) Stage 5 (low stationary); 5) Stage 5 (declining?). // Developed countries: in these countries the birth rate is decreasing while the death rate is increasing, in fact, they have cut each other these days and now the death rate is higher than the birth rate. Developing countries: both, the birth rate and the death rate are decreasing, however there are projections that both will slightly increase. // 5.-Population ageing: life expectancy increases over time so we see that nowadays population is ageing./ Remaining Life Expectancy (RLE): indicates to what age a person would live on average if the mortality assumptions per age which apply to that particular year are projected onto the remainder of their lives. HALE (health-adjusted life expectancy): average equivalent nº of years of full health that a person could expect to live., (THESE ARE NEW MEASURES OF AGEING). /Consequence of ageing: pop ageing will put financial pressure on old-age support systems which will have impacts in all areas of life (C,I, labor markets, pension systems, housing, health services, policies…). // Caring economy: sector of the econmy that is responsible for the provision of care and services that contribute to the nurturing and reproduction of current and future populations. 6.-Migration: Causes of migration: can be in general attributed to economic, political, social and/or demographic factors. Experts typically refer two opposing factors: 1) attraction factors (pull) or expulsion factors (push). // Characterisitcs of migration: different levels of migration across world, relative less importance when compared with flow of goods, more variety, high presence of women, rising diversity, issues with illegal/irregular migration, more transational capital, higher levels of migration in North America, Europe or Australia. // Effects of migrations. a) Receiving country: welfare state impacts (tax revenue, pensions, education and health), rejuvenation b) Sending country: may alleviate pressure on labor markets, remittances, risk of brain dain/potenitial increase of human capital if returns. // Current trends and projections: 1) world pop continues to increase but growth rate vary greatly among regions 2) rapid pop growht presents challenges for sustainable development 3) In some countries growth of the working-age pop is creating opportunities for economic growht 4) Women having fewer babies 5) people living longer 6) worlds pop growing older 7) countries facing a reduction in pop size 8) migration a major component in pop changes.

4.-Debrief Econland simulation Rollercoaster: more difficult scenario, typical for financial crisis. Stagflation: more difficult scenario, policies do not work at all. Corporate tax rate: % of profits firms need to pay as tax to gov. Income tax rate: % of their income that citizens  need to pay as tax to government.