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Lecture

Gastvortrag mit Prof. Mario Blejer

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Report

on Prof. Mario Blejer’s lecture:

"The Current World Macroeconomic Outlook and the Global Imbalances"

On April 26, 2006, students, faculty members and a large public gathered in the Maiersdorf Faculty Club to participate in a multi-disciplinary seminar, organized by the European Forum at the Hebrew University and the Konrad Adenauer Foundation. The current seminar's lecture was given by Prof. M. Blejer of the Bank of England and was devoted to the current world macroeconomic outlook.

Dr. Lars Hänsel, representative of the Konrad Adenauer Foundation in Israel, opened the seminar, greeting the public and the lecturer. Dr. Hänsel stressed the importance of the KAS – European Forum cooperation in various fields as a part of a larger framework of German-Israeli relations. The second speaker was Prof. Nathan Sussman, Department of Economics of the HU, who introduced the lecturer, his professional and academic credentials and the research fields to the audience.

Prof. Blejer presented to the public his current research, focusing on the present situation of global macroeconomics. The main question addressed by Prof. Blejer was whether the current macroeconomic situation is just a normal "Cyclical Upswing" or whether we are witnessing a totally new and unfamiliar situation, which requires the development of a new paradigm. In Prof. Blejer's opinion, the current world economic conditions are characterized by four elements:

  • High and sustained rate of global growth;
  • Low world inflation;
  • High prices for raw materials, energy, precious metals, and other commodities;
  • Low cost of capital for emerging countries, reflecting low systemic risk.
According to the data presented by Prof. Blejer, following the 2001/02 recession, global economic growth in 2004 was the highest in the past 30 years. Moreover and equally important, this rapid global growth is accompanied by a very low (by historical standards) world inflation, which is explained by the combination of two factors: jump in world productivity and the economic eruption of China. This constellation, encompassing high growth and low inflation is accompanied by a rapid, significant and unprecedented increase in prices of raw materials, energy, precious metals and commodities. Another characteristic of this new macroeconomic situation is an abundant availability of capital and very low cost of borrowing for emerging markets – for example, in 2005 alone American investors acquired in Emerging Markets financial assets worth U$S 52b - more than in the previous seven years together! The combination of previously mentioned factors requires, according to Prof. Blejer, the development of a new macroeconomic paradigm, which will address the current world's situation.

In his lecture Prof. Blejer also discussed the possible threats to and vulnerabilities of the new macroeconomic situation of unprecedented growth, high productivity and low inflation:

The Global Imbalance between developed countries (especially the US) and the rest of the world;

  • The risk of sharp changes in oil prices;
  • The risk of adopting neo-protectionist policies in industrial countries as a result of political pressure exercised by powerful industrial and agricultural lobbies;
  • Geopolitical factors (terrorism)
The lecture was followed by a discussion, emerging from the numerous questions and remarks from the audience.

Evgeny Finkel

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Venue

Hebräische Universität, Jerusalem

Speakers

  • Prof. Mario Blejer
    Contact

    Dr. Lars Hänsel

    Dr

    Head of the Department Europe and North America

    Lars.Haensel@kas.de +49 30 26996-3526

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    The Helmut Kohl Institute for European Studies, The Hebrew University of Jerusalem