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TEN YEARS AFTER THE GREAT FINANCIAL CRISIS: WHAT HAS AND HAS NOT CHANGED IN THE GLOBAL ECONOMY ? GLOBAL INTERDEPENDENCE CENTER “CENTRAL BANKING SERIES”

OLIVIER GARNIER DIRECTOR GENERAL – ECONOMICS AND INTERNATIONAL RELATIONS

14 MAY 2018


1. Growth / Productivity 2. Labour markets, inflation and monetary policies 3. Debt / Global imbalances

CMR - Partie MacroĂŠconomique - 23/01/2018

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1. GLOBAL TRADE & INDUSTRIAL PRODUCTION

World trade and industrial production (volumes) yoy %; source: CPB 20,0 15,0 10,0 5,0 0,0 -5,0 -10,0 -15,0 -20,0

World industrial production

World trade

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1. REAL GDP GROWTH : ADVANCED VS. EMERGING ECONOMIES

Real GDP Growth (in % y-o-y GDP) 10

Emerging 8 6

4,9 %

4 2

2,5 %

0

Advanced

-2 -4 2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

Source: IMF, WEO April 2018 3


1. REAL GDP PER CAPITA : US VS. EA

Real GDP per Capita 100 = 2000 Q1 125 120 115 110 105 100 95 Q1 2000 Q1 2002 Q1 2004 Q1 2006 Q1 2008 Q1 2010 Q1 2012 Q1 2014 Q1 2016 Q1 2018 EA

US

EA/US

Source: Datastream 4


1. WITHIN THE EURO AREA: REAL GDP RELATIVE TO AVERAGE Real GDP relative to EA average 100 = 2000 Q1 120 115 110 105

100 95 90 85 80 Q1 2000 Q1 2002 Q1 2004 Q1 2006 Q1 2008 Q1 2010 Q1 2012 Q1 2014 Q1 2016 Q1 2018 France/EA

Germany/EA

Italy/EA

Spain/EA

Source: Datasteram 5


1. PRODUCTIVITY TRENDS Average annual growth rate of labor productivity per hour Smoothed indicator (HP filter, λ = 500) - Whole economy – 1891-2016 – In % 9% 7% 5% 3% 1% -1%

United States

Euro Area

Japan

Source: Bergeaud, Cette and Lecat (2016) - See: www.longtermproductivity.com

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1. WORKING-AGE POPULATION GROWTH

Working-age population (15+, 2000=100) 125 120 115 110 105 100 95 90

France

Germany

China

United States

Source: ILO Note: break in series correspond to methodological changes

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1. SHARES IN GLOBAL GDP

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1. Growth / Productivity 2. Labour markets, inflation and monetary policies 3. Debt / Global imbalances

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Q1-2000 Q4-2000 Q3-2001 Q2-2002 Q1-2003 Q4-2003 Q3-2004 Q2-2005 Q1-2006 Q4-2006 Q3-2007 Q2-2008 Q1-2009 Q4-2009 Q3-2010 Q2-2011 Q1-2012 Q4-2012 Q3-2013 Q2-2014 Q1-2015 Q4-2015 Q3-2016 Q2-2017 Q1-2018

2. UNEMPLOYMENT RATES

Unemployment rates, in %

14,0

12,0

10,0

8,0

6,0 US

EA

4,0

2,0

0,0

Source: OECD

10


Employment rate (Men 25-54)

90,0 94,0

88,0 93,0

86,0

84,0

82,0

80,0

78,0

76,0 Q1-2000 Q1-2001 Q1-2002 Q1-2003 Q1-2004 Q1-2005 Q1-2006 Q1-2007 Q1-2008 Q1-2009 Q1-2010 Q1-2011 Q1-2012 Q1-2013 Q1-2014 Q1-2015 Q1-2016 Q1-2017 Q1-2018

Q1-2000 Q1-2001 Q1-2002 Q1-2003 Q1-2004 Q1-2005 Q1-2006 Q1-2007 Q1-2008 Q1-2009 Q1-2010 Q1-2011 Q1-2012 Q1-2013 Q1-2014 Q1-2015 Q1-2016 Q1-2017 Q1-2018

2. PARTICIPATION RATES & EMPLOYMENT RATES. FOCUS MEN (25-54)

Participation rate (Men 25-54)

92,0

91,0

90,0

US 89,0 US

EA 88,0 EA

87,0

86,0

85,0

Source: OECD

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10,0 10,0

0,0 0,0

Employment rate (55-64)

70,0 70,0

60,0 60,0

50,0 50,0

40,0 40,0

30,0 US

20,0 EA

Q1-2000 Q1-2001 Q1-2002 Q1-2003 Q1-2004 Q1-2005 Q1-2006 Q1-2007 Q1-2008 Q1-2009 Q1-2010 Q1-2011 Q1-2012 Q1-2013 Q1-2014 Q1-2015 Q1-2016 Q1-2017 Q1-2018

Q1-2000 Q1-2001 Q1-2002 Q1-2003 Q1-2004 Q1-2005 Q1-2006 Q1-2007 Q1-2008 Q1-2009 Q1-2010 Q1-2011 Q1-2012 Q1-2013 Q1-2014 Q1-2015 Q1-2016 Q1-2017 Q1-2018

2. PARTICIPATION RATES & EMPLOYMENT RATES. FOCUS SENIORS (55-64)

Participation rate (55-64)

30,0 US

20,0 EA

Source: OECD

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2. INFLATION

CPI yoy % 6 5 4 3 2 1 0 -1 -2 -3

US

EA

Source: OECD

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2. OIL PRICES

Oil prices (Brent, USD) 160 140 120 100 80 60 40 20 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Source: Thomson Reuters 14


2. MAIN CENTRAL BANKS POLICY RATES

Central Bank Policy Rate (%) 7 6 5 4 3 2

1 0 -1 2000

2002

2004

2006 US

2008

2010 EA

2012

2014

2016

2018

Japan

Sources: Reuters, ECB, BOJ 15


2. CENTRAL BANKS’ BALANCE SHEETS AND ASSET PURCHASES Cettral bank balance sheet (2000 Q1=100) 900,00 800,00 700,00

600,00 500,00 400,00 300,00 200,00 100,00

Q1 2000 Q4 2000 Q3 2001 Q2 2002 Q1 2003 Q4 2003 Q3 2004 Q2 2005 Q1 2006 Q4 2006 Q3 2007 Q2 2008 Q1 2009 Q4 2009 Q3 2010 Q2 2011 Q1 2012 Q4 2012 Q3 2013 Q2 2014 Q1 2015 Q4 2015 Q3 2016 Q2 2017

0,00

ECB

FED

BoJ

Source: Datastream

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2. 10YR TREASURY YIELDS

10-year sovereign yields In %; source: Thomson Reuters 7,0 6,0 5,0 4,0 3,0 2,0 1,0

0,0 -1,0

Japan

Germany

USA

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2. COST OF CAPITAL

NFCs' Cost of Capital : France 15

10

5

0

2006M1

2008M1

CoE with buybacks

2010M1

2012M1

WACC

2014M1

Loan rate

2016M1

2018M1

Bond rate

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2. 2-YEAR GOVERNMENT BOND YIELD SPREAD (GER-US) & EUR/USD EXCHANGE RATE 2-year sovereign yields spread Ger-USA (left) and $/€ exchange rate (right) In percentage points; source: Thomson Reuters 3,0

1,800

2,0

1,600

1,0 1,400 0,0 1,200 -1,0 1,000 -2,0 0,800

-3,0 -4,0

0,600

Spread

Exchange rate

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2. REAL EFFECTIVE EXCHANGE RATES

Real effective exchange rate – CPI-based (BROAD indices - 61 economies) 100 = average 1994-2018

140 130 120 110 100 90 80 70 60 01/2000

01/2003

USA

01/2006

euro area

01/2009

Japan

01/2012

01/2015

UK

01/2018

China

Source : BIS

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1. Growth / Productivity 2. Labour markets, inflation and monetary policies 3. Debt / Global imbalances

CMR - Partie MacroĂŠconomique - 23/01/2018

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3. NONFINANCIAL DEBT : PRIVATE & PUBLIC

Public debt (% of GDP)

Non financial private sector debt (% of GDP)

90 80 70 60 50

EA

US

Source: Banque de France

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2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

40 2002

US

100

2001

EA

110

2000

180 170 160 150 140 130 120 110 100 90 80 2000 2002 2004 2006 2008 2010 2012 2014 2016


3. GLOBAL NONFINANCIAL DEBT: ADVANCED & EMERGING

% world GDP

250

200

165

150

100

176

177

50

Advanced economies Emerging markets

71 23

30

2002

2007

2017*

200

206

237

0 Non-financial sector debt (% world GDP) Source : BIS, BdF calculations

*Average over the first 3 months of 2017

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3. CURRENT ACCOUNT BALANCES

Current account balances (% of GDP)

Current account balances (bn USD) 1500

20,0 15,0

1000

10,0 500 5,0 0

Oil exporters

China

US

EA

Oil exporters

China

US

EA

Source: WEO April 2018

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2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

-10,0 2002

-1000

2001

-5,0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

-500

2000

0,0


3. CURRENT ACCOUNT BALANCES WITHIN THE EURO AREA

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3. NONFINANCIAL CORPORATE NET LENDING (AS % OF GDP)

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3. GLOBAL SAVING & INVESTMENT

Source: Chen-Karabarbounis-Neiman (2017) 27


3. GLOBAL CORPORATE SAVING

Source: Chen-Karabarbounis-Neiman (2017) 28


Conclusion

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HOW TO EXIT DURABLY THE INCOMPATIBILITY TRIANGLE?

Slower Trend in Productivity Growth

Ageing Population

Higher Private and Public Debt Ratios Ultra-accommodative monetary policies can only provide a window of opportunity for preparing a durable exit out of this triangle 30

Ten years after the Great Financial Crisis: what has and has not changed in the global economy?  

Olivier Garnier at the Central Banking Series with Banque de France in Paris, France on May 14, 2018.

Ten years after the Great Financial Crisis: what has and has not changed in the global economy?  

Olivier Garnier at the Central Banking Series with Banque de France in Paris, France on May 14, 2018.