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The old central-bank playbook of slashing interest rates to spur consumption, investment, and employment has become less effective since the 2008 financial crisis. Yet without effective tools and the public's confidence, central banks will be unable to rise to the occasion when the next recession arrives.
More inclusive global growth in a world with free capital mobility does not require a “global” government that taxes and redistributes, but it does require global taxation and tax cooperation. Countries should be free to set their own taxes, but they should be required to share tax-relevant information.
French President Emmanuel Macron has drawn criticism for describing NATO as brain dead and pursuing a rapprochement with Russian President Vladimir Putin. But now that a wayward America could abandon the continent at any moment, Macron's argument for European defense autonomy is difficult to refute.
CAMBRIDGE – Few economies pose as big a paradox as Mexico’s. Emerging from a series of macroeconomic crises in the mid-1990s, Mexico undertook bold reforms that should have put it on track for rapid economic growth. It embraced macroeconomic prudence, liberalized its economic policies, signed the North American Free Trade Agreement (NAFTA), invested in education, and implemented innovative policies to combat poverty.
In many respects, these reforms paid off. Macroeconomic stability was achieved, domestic investment rose by two percentage points of GDP, and average educational attainment increased by nearly three years. Perhaps the most visible gains were on the external front. Exports jumped from 5% to 30% of GDP, and the GDP share of inward foreign direct investment tripled.
But where it counts – in overall productivity and economic growth – the story is one of substantial disappointment. Since 1996, per capita economic growth has averaged well below 1.5%, and total factor productivity has stagnated or declined.
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