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Stalled by Winter Weather, Economic Growth Projected to Regain Momentum

World Economic Update

Speakers: Lewis Alexander, Managing Director and Chief U.S. Economist, Nomura; Former Counselor to the Secretary of the Treasury, U.S. Department of the Treasury; Former Chief Economist, Citigroup
Takatoshi Ito, Professor, Graduate School of Economics, and Dean, Graduate School of Public Policy, University of Tokyo; Former Deputy Vice Minister for International Affairs, Ministry of Finance, Government of Japan
Vincent Reinhart, Managing Director and Chief U.S. Economist, Morgan Stanley; Former Director, Division of Monetary Affairs, Board of Governors of the Federal Reserve System
Presider: Sebastian Mallaby, Director, Maurice R. Greenberg Center for Geoeconomic Studies and Paul A. Volcker Senior Fellow for International Economics, Council on Foreign Relations
February 27, 2014

Event Description

Harsh winter weather appears to have dealt the global economic recovery a temporary setback, but growth is projected to pick up again later this year. Nomura's Lewis Alexander, Takatoshi Ito from the University of Tokyo, and Vincent Reinhart of Morgan Stanley discuss the current state of the global economy with CFR's Sebastian Mallaby. The panelists focus on the declining labor force participation rate in the United States, the Federal Reserve's tapering of its quantitative easing program, and Japan's ongoing efforts to fight deflation through unconventional monetary policy.

This series is preseted by the Maurice R. Greenberg Center for Geoeconomic Studies.

Event Highlights

Takatoshi Ito on Japan's efforts to end deflation and encourage domestic investment:

"People have been putting money into deposits. And that has been a huge success because deposits [are] paying zero interest rate but the prices are dropping at 1 percent. So real return is 1 percent, while someone who invested in equities, they have lost huge. There is a mind among the Japanese investors that deposits are safe and stocks are a losing proposition. We have to change this perception."

Lewis Alexander on the state of the economic recovery in the European Union:

"The two big surprises have been the fact that the ECB has been as successful as they have been at sort of stabilizing the financial side with what were, to be perfectly frank, kind of amorphous commitments. The other surprise has frankly been that the politics has sustained what has been a very caustic real adjustment. So I think there was always the skepticism about how much internal adjustment you could get without the exchange rate and what was consistent with the politics. And the surprise has been, they've been willing to live with more pain, in some sense, than you would have expected."

Vincent Reinhart unemployment and the declining labor force participation rate in the United States:

"[J]ust controlling for demographics, we can account for probably a third of the decline in the labor force participation. The other third—two thirds, that doesn't mean it's all cyclical. There's probably some cyclicality to it. But you also have to think about things like returns to skills. Because of globalization and technological progress, those who have high skills are getting higher rewards. Those who have lower skills are getting lower rewards."


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