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On Time, Stocks and Flows: Understanding the Global Macroeconomic Challenges

Published online by Cambridge University Press:  26 March 2020

Claudio Borio
Claudio Borio*
Affiliation:
Bank for International Settlements
*
E-mail: [email protected].
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Abstract

Five years after the financial crisis, the global economy remains unbalanced and many of the advanced countries are still struggling to return to robust, sustainable growth. Taking a historical perspective, I argue that this predicament reflects a failure to adjust to profound changes in the economic landscape, which have given rise to the (re-)emergence of major financial booms and busts. The economic developments that really matter now take much longer to unfold – economic time has slowed down relative to calendar time – and yet the planning horizons of economic agents have shortened. The key problems arise from the cumulative effects of past decisions on stocks, and yet these effects are treated as short-term flow issues. The risk is that instability will become entrenched in the system. Policy needs to adjust.

Keywords

short horizonsdebtfinancial cyclebanking crisesbalance sheet recessionsE30E44E50G10G20G28H30H50
Type
Research Articles
Information
National Institute Economic Review , Volume 225 , August 2013 , pp. R3 - R13
Copyright
Copyright © 2013 National Institute of Economic and Social Research

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Footnotes

This paper is a lightly revised version of a lecture delivered at the Munich Seminar series, co-organised by the University of Münich, the Ifo Institute for Economic Research and the Sueddeutsche Zeitung on 15 October 2012. The only changes made include a list of references and footnotes. The themes explored here are developed in much more detail in three other pieces of work, which also contain extensive bibliographies, including in particular Borio (2009), (2011) and (2012). The views expressed are my own and do not necessarily reflect those of the Bank for International Settlements.

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