The Great Financial Crisis (GFC) mainly hit financing and hence the ability of companies to finance investment, while the Corona crisis has predominantly hit the labour input via the lockdown. ! Calculate the impact of both crises on long-run growth assuming that the labour share is 0.7 and the following information are given: – GFC: Growth rate of labour = 0%, Growth rate of capital= -5%, Growth rate of TFP = 1% – Corona Crisis: Growth rate of labour = -5%, Growth rate of capital = 0%, Growth rate of TFP = 1% ! Discuss whether and under what circumstances the lockdown will lead to a lower potential output in the long-run. ! In the light of the growth accounting insights, what policies would you recommend to revive growth after the lockdown
The Great Financial Crisis (GFC) mainly hit financing and hence the
ability of companies to finance investment, while the Corona crisis has
predominantly hit the labour input via the lockdown.
! Calculate the impact of both crises on long-run growth assuming that the
labour share is 0.7 and the following information are given:
– GFC: Growth rate of labour = 0%, Growth rate of capital= -5%, Growth rate of TFP =
1%
– Corona Crisis: Growth rate of labour = -5%, Growth rate of capital = 0%, Growth rate
of TFP = 1%
! Discuss whether and under what circumstances the lockdown will lead to
a lower potential output in the long-run.
! In the light of the growth accounting insights, what policies would you
recommend to revive growth after the lockdown?
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