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Understanding the Stagnation of Modern Economies
Robert E. Hall Hoover Institution and Department of Economics Stanford University The Phillips Lecture London School of Economics 28 April 2016 ·
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Understanding the Stagnation of Modern Economies Professor Robert - - PowerPoint PPT Presentation
Understanding the Stagnation of Modern Economies Professor Robert - - PowerPoint PPT Presentation
Department of Economics and Economica public lecture Understanding the Stagnation of Modern Economies Professor Robert Hall Robert and Carole McNeill Senior Fellow, Hoover Institution Professor of Economics, Stanford University Professor
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Allocation of 10.0 percentage points of shortfall in real GDP, 2010
2.3 3.1 1.3 3.3
0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 1 2 3 4
Excess unemployment Reduced productivity growth Shrunken labor force Shrunken labor force Depleted capital stock
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Allocation of 15.4 percentage points of shortfall in real GDP, 2015
5.1 6.6 3.3 0.5
0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 1 2 3 4
Reduced productivity growth Shrunken labor force Shrunken labor force Depleted capital stock Excess unemployment
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Topic 1: Output
15 16 17 18 19 20 21 1948 1954 1960 1966 1972 1978 1984 1990 1996 2002 2008 2014 Trillions of 2009 dollars
Detrended real GDP
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Topic 2: Unemployment
2 4 6 8 10 12 1948 1954 1960 1966 1972 1978 1984 1990 1996 2002 2008 2014 Percent of labor force 5
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Unemployment and productivity
0.8 0.8 0.9 0.9 1.0 1.0 1.1 2 4 6 8 10 12 1948 1954 1960 1966 1972 1978 1984 1990 1996 2002 2008 2014 Reciptorcal of index of real output per worker Percent of population working or looking for work Unemployment rate (left scale) Output per worker (inverse, right scale) 6
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Unemployment and the stock market
0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 2 4 6 8 10 12 1948 1954 1960 1966 1972 1978 1984 1990 1996 2002 2008 2014 Reciptorcal of index of real value of the stock market Percent of population working or looking for work Unemployment rate (left scale) Stock market (inverse, right scale) 7
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Direct Effect of Unemployment
15 16 17 18 19 20 21 1948 1954 1960 1966 1972 1978 1984 1990 1996 2002 2008 2014 Detrended Real GDP, trillions of 2009 dollars Real GDP Adjusted for direct effect of unemployment 8
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Topic 3: Shrinkage of the labor force
30 40 50 60 70 80 90 1948 1954 1960 1966 1972 1978 1984 1990 1996 2002 2008 2014 Percent Men Women
Percent of population working or looking for work
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Role of family income
from Hall and Petrosky-Nadeau (2016)
- 2.5%
- 1.5%
- 0.5%
0.5% 1.5%
1st 2nd 3rd 4th Total
0.7 0.3
- 1.5
- 2.0
- 2.6
1st (poorest) 2nd 4th (richest) 3rd Total
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Changes in weekly hours of time use, 2003 to 2013, people 15 and older
Personal care Household work Market work Education Leisure Other Men 1.3 0.1
- 2.5
0.2 1.3
- 0.4
Women 1.6
- 0.7
- 0.8
- 0.1
0.8
- 0.8
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Topic 4: Total Factor Productivity
0.80 0.85 0.90 0.95 1.00 1.05 1.10 1.15 1.20 1.25 1.30 1948 1954 1960 1966 1972 1978 1984 1990 1996 2002 2008 2014 Index
Detrended index of output per unit of Input
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Declining IP investment
0.6 1.1 1.6 2.1 2.6 3.1 1948 1954 1960 1966 1972 1978 1984 1990 1996 2002 2008 2014 Index
Detrended Index of investment in intellectual property including R&D
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Technology diffusion is sensitive to macro conditions
from Anzoategui et al.
2004 2005 2006 2008 2009 2010 2012
- 0.8
- 0.6
- 0.4
- 0.2
0.2 0.4 0.6 0.8 1 Diffusion Speed for 3 Internet Technologies in UK
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Topic 5: Capital Depletion
0.80 0.85 0.90 0.95 1.00 1.05 1.10 1.15 1.20 1.25 1948 1954 1960 1966 1972 1978 1984 1990 1996 2002 2008 2014 Index
Detrended index of busines capital
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Business Earnings as a Ratio to the Value of Capital
0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 1948 1954 1960 1966 1972 1978 1984 1990 1996 2002 2008 2014 Ratio of capital earnings to value of capital 16
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Allocation of 15.4 percentage points of shortfall in real GDP, 2015
5.1 6.6 3.3 0.5
0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 1 2 3 4
Reduced productivity growth Shrunken labor force Shrunken labor force Depleted capital stock Excess unemployment
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Topic 6: The Lower Bound on the Nominal Interest Rate
0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 2016 2020 2024 2028 2032 2036 2040 2044 Percent per year
Short‐term future interest rate implied by yields on longer‐term treasury bonds
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Monetary policy has much less scope for stimulus
2 4 6 8 10 12 14 16 18 1955 1961 1967 1973 1979 1985 1991 1997 2003 2009 2015 Percent per year
Federal Reserve Policy Interest Rate
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Sources
◮ Diego Anzoategui, Diego Comin, Mark Gertler, and Joseba
Martinez, “Endogenous Technology Adoption and R&D as Sources of Business Cycle Persistence”, February 2016
◮ Robert Hall, “High Discounts and High Unemployment”,
“Understanding the Decline in the Safe Real Interest Rate”, “Macroeconomics of Persistent Slumps” (chapter for new Handbook of Macroeconomics)
◮ Robert Hall and Nicolas Petrosky-Nadeau, “Changes in
Labor Participation and Household Income”, FRBSF Economic Letter 2016-02, February 2016 ·
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