4 min read.Updated: 11 Aug 2022, 09:15 AM ISTNouriel Roubini, Bloomberg
The world is unlikely to escape stagnant growth and high inflation
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The world economy is undergoing a radical shift. The decades-long Great Moderation is over. Coming after the stagflation of the 1970s and early 1980s, it was characterized by low inflation in rich economies, relatively stable and robust economic growth, with short and shallow recessions, low and falling bond yields, thanks to a secular fall in inflation, and sharply rising values of risky assets. This period is usually explained by central banks’ move to credible inflation-targeting policies after the loose monetary policies of the 1970s and governments’ adherence to relatively conservative fiscal policies. But, more important than demand-side policies were positive supply shocks that upped potential growth and reduced production costs, thus keeping inflation in check.
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