Hartar Blog

The deceleration of China's GDP growth rate has been seen both as a natural transition towards more sustainable growth rates and a sign that the Chinese model of growth is coming to an end. How does this deceleration of growth rates compared to similar historical episodes for other countries? Is 6-7% a sustainable growth rate for China? Let's frame these questions in the traditional model economists use to look at growth rates of emerging and low-income economies: the convergence model (based on the work of Robert Solow). The main prediction: countries that are lagging have more opportunities for investment and they are likely to grow faster than countries at the technology frontier. Because of faster growth rates we expect to see convergence in GDP per capita. As convergence happens, growth rates will naturally slowdown to reach those of the countries at the frontier. [The theory also states that not all countries might converge to the same level of GDP per capita but let'...

From this Financial Times article : In yesterday's press conference Mario Draghi was asked about the possibility of changing the ECB's inflation target. His answer is very revealing about the extreme asymmetric nature of monetary policy these days (or at least that's how the ECB sees it). Draghi admits that the ECB is having a very difficult time reaching its target and he is now hoping this will happen by 2018. He rules out the idea of lowering the inflation target (to make reaching the target easier) because this would lead to lower inflation expectations and higher real interest rates. So what about raising the inflation target to avoid falling into the zero lower bound again (and possibly to show a stronger commitment to higher inflation)? According to Draghi it would make no sense because if they cannot reach a 2% target why would you set a higher target that you cannot reach by an even larger margin. This might be a realistic view on how asymmetric the effects of mone...