Digitalization During the COVID-19 Crisis: Implications for Productivity and Labor Markets in Advanced Economies
Digitalization induced by the pandemic was seen both as a possible silver-lining from the crisis that could increase longer-term productivity and a risk for further labor market inequality between digital and non-digital workers. The note shows that the pandemic accelerated digitalization and triggered a partial catch-up by less digitalized entities in advanced economies. Higher digitalization levels shielded substantially productivity and hours worked during the crisis. However, the extent to which the pandemic-induced digitalization led to structural change in the economy is less clear.
New Directions for Monetary Policy
Now, inflation is one of several worries facing central banks. A rapidly changing economic backdrop leaves less maneuvering room for policy, while structural forces—geopolitical fragmentation, climate change, an aging workforce, and the advent of digital money—have greatly complicated the underlying policy challenge. In this issue, distinguished contributors offer insights on how central bankers can navigate an increasingly complex world.
Public Perceptions of Climate Mitigation Policies: Evidence from Cross-Country Surveys
Building public support for climate mitigation is a key prerequisite to making meaningful strides toward implementing climate mitigation policies and achieving decarbonization. Using nationally representative individual-level surveys for 28 countries, this note sheds light on the individual characteristics and beliefs associated with climate risk perceptions and preferences for climate policies.
Inflation Peaking amid Low Growth
The January 2023 World Economic Outlook Update projects that global growth will fall to 2.9 percent in 2023 but rise to 3.1 percent in 2024. The 2023 forecast is 0.2 percentage point higher than predicted in the October 2022 World Economic Outlook but below the historical average. Rising interest rates and the war in Ukraine continue to weigh on economic activity. China’s recent reopening has paved the way for a faster-than-expected recovery. Global inflation is expected to fall to 6.6 percent in 2023 and 4.3 percent in 2024, still above pre-pandemic levels.
Geo-Economic Fragmentation and the Future of Multilateralism
After several decades of increasing global economic integration, the world is facing the risk of policy-driven geoeconomic fragmentation (GEF). This note explores the ramifications. It identifies multiple channels through which the benefits of globalization were earlier transmitted, and along which, conversely, the costs of GEF are likely to fall, including trade, migration, capital flows, technology diffusion and the provision of global public goods. It explores the consequences of GEF for the international monetary system and the global financial safety net. Finally, it suggests a pragmatic path forward for preserving the benefits of global integration and multilateralism.
Accelerating Innovation and Digitalization in Asia to Boost Productivity
Asia has risen to become an innovation powerhouse, contributing to more than half of world patents. The rise of Asia as an innovation hub has been driven by a few frontier countries that have experienced a sharp increase in digital and computer-related patents, supported by solid R&D spending and a large share of researchers in the labor force. Within countries, R&D has become more concentrated in a smaller share of firms in frontier Asia. Empirical evidence using firm-level data highlight that the high concentration in R&D is associated with large dispersion in productivity. External exposure to competition and innovation, including through trade, supports innovation and help close productivity gaps for firms closer to the frontier.
