EB articles published in 2018

6 November 2018
The state of the housing market in the euro area

Abstract

JEL Classification

E22 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Capital, Investment, Capacity

E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation

E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles

R31 : Urban, Rural, Regional, Real Estate, and Transportation Economics→Real Estate Markets, Spatial Production Analysis, and Firm Location→Housing Supply and Markets

Abstract

The housing market has important macroeconomic and macroprudential implications for the euro area economy. In view of the duration of the ongoing upturn in euro area house prices and residential investment, which started at the end of 2013, analysing the state of the housing market is particularly informative. This article discusses the ongoing housing market upturn, from a chronological and fundamental perspective. It also explores a selected set of indicators that can potentially inform on the state of the housing market, elaborating on the demand and supply factors underpinning the current upturn, as well as their relative importance.

Economic Bulletin Issue 7, 2018
5 November 2018
Potential output in the post-crisis period

Abstract

JEL Classification

E22 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Capital, Investment, Capacity

E23 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Production

E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles

Abstract

Potential output is typically seen by economic analysts as the highest level of economic activity that can be sustained over the long term. Changes in potential output can be driven by factors such as labour supply, capital investment and technological innovation. Recent estimates by international institutions suggest that the euro area economy is currently operating close to its potential. The ongoing economic expansion appears to have largely absorbed the spare capacity created by the global financial crisis and the sovereign debt crisis. At the same time, the estimated rate of potential output growth also appears to have recovered most of its pre-crisis momentum, underpinned mainly by an expansion of the labour force, a decline in trend unemployment and stronger productivity gains. Looking ahead, projections by international institutions suggest that actual euro area GDP growth will continue to outpace potential growth in the near term. Hence, supply constraints are likely to become increasingly binding going forward, which would be conducive to a gradual strengthening of euro area inflation.

Economic Bulletin Issue 7, 2018
27 September 2018
The global financial cycle: implications for the global economy and the euro area

Abstract

JEL Classification

E42 : Macroeconomics and Monetary Economics→Money and Interest Rates→Monetary Systems, Standards, Regimes, Government and the Monetary System, Payment Systems

E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy

F31 : International Economics→International Finance→Foreign Exchange

F36 : International Economics→International Finance→Financial Aspects of Economic Integration

F41 : International Economics→Macroeconomic Aspects of International Trade and Finance→Open Economy Macroeconomics

Abstract

As financial markets became progressively more integrated internationally over the past decades, economists wondered to what extent policymakers can isolate domestic financial conditions from external factors. This article reviews the terms of this debate and provides fresh evidence on the co-movement in capital flows and stock prices across a panel of 50 advanced and emerging economies. In particular, the article focuses on the relative importance of global risk and US monetary policy for the global financial cycle and touches upon the implications for the exchange rate regime. Global risk aversion emerges as a significant driver of capital flows and stock returns and its impact is amplified by capital account openness, but not necessarily by the exchange rate regime, which matters only for asset prices, not for capital flows. The quantitative relevance of US monetary policy and the US dollar exchange rate seems to be episodic. In particular, the correlation between US interest rates and capital flows throughout the crisis is positive, rather than negative as the theory would predict, indicating the need for further empirical analysis of the role of US monetary policy as the driver of the global financial cycle. The article also finds that financial market tensions have been typically synchronised between the euro area and the United States but that financial conditions in the two areas have often decoupled. Overall, this confirms that the effectiveness of the ECB’s monetary policy has not been impaired by the global financial cycle.

Economic Bulletin Issue 6, 2018
25 September 2018
Interpreting recent developments in market based indicators of longer term inflation expectations

Abstract

JEL Classification

E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy

G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates

G01 : Financial Economics→General→Financial Crises

Abstract

Private sector inflation expectations are a key component of a broad range of indicators that the ECB considers when determining the appropriate monetary policy stance for achieving its price stability objective. Inflation expectations can not only affect inflation itself through the wage and price-setting processes, but also serve as a useful cross-check on the ECB’s and the Eurosystem’s own projections. This article focuses on market-based measures of longer-term inflation expectations, which are timely indicators derived from the prices of instruments that are traded in financial markets and linked to future inflation outcomes. It reviews recent developments in the information that can be extracted from different types of market-based indicator, starting from the period leading up to the ECB’s announcement of its expanded asset purchase programme (APP). The fall in market-based indicators of longer-term inflation expectations between 2014 and mid-2016 was consistent across major jurisdictions, possibly reflecting global concerns about weak aggregate demand and associated disinflationary pressures. Their subsequent recovery has been driven by a partial dissipation of these concerns and, in particular, a significant improvement in the euro area macroeconomic environment. The lion’s share of the movement in longer-term inflation expectations over the past few years has stemmed from the inflation risk component of these indicators, suggesting that the balance of risks to the inflation outlook has been one of the main drivers. Indeed, information extracted from the prices of inflation options implies that the risk-neutral probability of deflation increased noticeably in late 2014 and early 2015, before declining more recently.

Economic Bulletin Issue 6, 2018
24 September 2018
Trends and developments in the use of euro cash over the past ten years

Abstract

JEL Classification

D12 : Microeconomics→Household Behavior and Family Economics→Consumer Economics: Empirical Analysis

E41 : Macroeconomics and Monetary Economics→Money and Interest Rates→Demand for Money

E42 : Macroeconomics and Monetary Economics→Money and Interest Rates→Monetary Systems, Standards, Regimes, Government and the Monetary System, Payment Systems

Abstract

This article presents the developments in the circulation of euro banknotes and the underlying drivers of cash demand in the euro area and abroad. Cash in circulation is on the rise, both in the euro area and abroad. In addition, data from a survey on the use of cash in the euro area indicates that by volume and number of transactions cash remained the most used payment instrument in 2016. However, the growth in banknote circulation can only partially be explained by transaction demand. Most euro banknotes in circulation are used as a store of value and households and firms inside and outside of the euro area obviously value the option of storing part of their assets in central bank money. Considering the currently low opportunity costs of holding cash, the stored euro banknotes can be expected to return if interest rates were to increase. However, as shown by developments over the past ten years, the store of value function is determined not only by interest rates, but also by external events which cannot be predicted. The demand for banknotes has also been impacted by various additional factors such as the financial and sovereign debt crises, geopolitical uncertainties, exchange rate developments and policy decisions

Economic Bulletin Issue 6, 2018
9 August 2018
The evolution of the ECB’s accountability practices during the crisis

Abstract

JEL Classification

E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy

E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies

Abstract

This article examines the evolution of the ECB’s accountability practices during the financial crisis. After describing the challenges stemming from the crisis and changes resulting from the conferral of new supervisory tasks on the ECB, it provides evidence on how the strengthening of the ECB’s accountability has taken shape in the context of its relationship with the European Parliament in line with the latter’s key role as provided for in the Treaties. The ECB and the European Parliament, building on the accountability framework enshrined in primary law, have increased the frequency of their interactions, made innovations regarding the format and sharpened the focus of their exchanges, allowing increased scrutiny of the ECB’s policies. This has provided the ECB with more opportunities to explain its decisions and demonstrate that it is acting in accordance with its democratic mandate, which is a fundamental pillar of its legitimacy.

Economic Bulletin Issue 5, 2018
8 August 2018
Private consumption and its drivers in the current economic expansion

Abstract

JEL Classification

D31 : Microeconomics→Distribution→Personal Income, Wealth, and Their Distributions

E21 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Consumption, Saving, Wealth

E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles

E50 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→General

Abstract

This article documents the key role that private consumption has played in recent output growth (2013-18), and asks how long the current growth in consumption can continue and whether it is self-sustaining. To that end, this article tries to identify the relative importance of different factors driving consumption, such as the recovery in the labour market, accommodative monetary policy, the 2014-15 drop in oil prices, the increase in asset prices, the easing of credit conditions and deleveraging. As the fall in consumption from 2008 to 2013 was very heterogeneous across countries, this article also sheds light on the extent to which the current expansion has actually led to a net increase in consumption over the past decade. This is relevant because private consumption is also a prime indicator of the economic well-being of households. While the growth of consumption has been low compared with previous expansions, since 2013 it has exceeded initial expectations. It has been driven mainly by the recovery in the labour market, even though unemployment in some countries and for some groups of workers remains higher than before 2008. Looking forward, as labour markets continue to improve, private consumption should expand further in all countries and for all groups of workers. Through its impact on the labour market, the ECB’s accommodative monetary policy is not only contributing to the expansion of private consumption, but also to a decrease in inequality. At the same time, there is little evidence that low interest rates have led to generalised increases in household indebtedness, supporting the sustainability of the overall economic expansion.

Economic Bulletin Issue 5, 2018
7 August 2018
Measuring fragmentation in the euro area unsecured overnight interbank money market

Abstract

JEL Classification

D53 : Microeconomics→General Equilibrium and Disequilibrium→Financial Markets

E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects

E50 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→General

Abstract

The overnight money market plays an important role in the implementation and transmission of monetary policy in the euro area. Money market fragmentation is a sign of impairment in the transmission mechanism which merits the close monitoring of a set of suitable indicators. This article discusses concepts and measurement of fragmentation and proposes a new measure of fragmentation from a monetary policy transmission perspective.

Economic Bulletin Issue 5, 2018
28 June 2018
Measuring and interpreting the cost of equity in the euro area

Abstract

JEL Classification

E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy

G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates

G32 : Financial Economics→Corporate Finance and Governance→Financing Policy, Financial Risk and Risk Management, Capital and Ownership Structure, Value of Firms, Goodwill

G35 : Financial Economics→Corporate Finance and Governance→Payout Policy

Abstract

Equity capital is among the main sources of funding for euro area non-financial corporations (NFCs), making it an important factor in the transmission of monetary policy. From a central bank perspective, improving the measurement and understanding of the cost of equity is therefore essential. Unlike the cost of debt, which has declined substantially in recent years, the cost of equity has remained relatively stable at elevated levels. Results from the analysis performed in this article suggest that a persistently high “equity risk premium” (ERP) has been the key factor underpinning the high cost of equity for euro area NFCs. In fact, since the start of the global financial crisis, increases in the ERP have largely offset the fall in the yield of risk-free assets. This article argues that the widely used workhorse model to derive the cost of equity and the ERP, namely the three-stage dividend discount model, can be improved upon. In particular, incorporating short-term earnings expectations, discounting payouts to investors with a discount factor with appropriate maturity, and considering share buy-backs all yield beneficial refinements. This in turn would strengthen the theory and basis of the model and improve the robustness of its estimates. Most notably, share buy-back activity seems to matter, specifically for the level of the ERP. Notwithstanding such improvements in the modelling approach, estimating the ERP, particularly its level, remains subject to considerable uncertainty. Ultimately, such uncertainty advocates the use of a variety of models and survey estimates, as well as a focus on the dynamics, rather than on the level, of the ERP. From an applied perspective, the article demonstrates that cost of equity modelling can be used to disentangle the different drivers of changes in equity prices. This is helpful from a monetary policy perspective, as changes in equity prices can contain important information about the economic outlook and warrant monitoring for financial stability purposes. Moreover, the article shows that adding an international perspective to the analysis of the ERP for the overall market may provide valuable insights for policymakers. For instance, the greater reliance on share buy-backs among companies in the United States than those in the euro area appears to be behind some of the recent steeper decline in the ERP in the United States when compared with the ERP in the euro area.

Economic Bulletin Issue 4, 2018
26 June 2018
Foreign direct investment and its drivers: a global and EU perspective

Abstract

JEL Classification

F21 : International Economics→International Factor Movements and International Business→International Investment, Long-Term Capital Movements

F23 : International Economics→International Factor Movements and International Business→Multinational Firms, International Business

Abstract

The relevance of foreign direct investment (FDI) as a source of economic activity has increased rapidly over the last decade. Between 2000 and 2016 the share of FDI stock in global GDP increased from 22% to 35%. Following a decline during the Great Recession, mergers and acquisitions (M&As), the most dynamic component of FDI, have recovered, reaching a record value of USD 1.2 trillion in the first quarter of 2018. The intensification of FDI activity has important implications for both origin and destination countries in terms of, for example, economic growth, productivity, wages and employment. Moreover, the expansion of multinational enterprises (MNEs) has been accompanied by the creation of complex cross-border production chains, which also has important implications. This article presents several findings regarding the main developments in and determinants of FDI over the past decade, at both global and EU level. Since the beginning of the 2000s there has been a gradual shift in the global FDI landscape, with emerging market economies (EMEs) gaining in prominence both as a source of and as a destination for such investment. EMEs have attracted a growing share of FDI flows, reaching more than 50% of the world’s total inward FDI in 2013. In addition, FDI flows are dominated by a relatively small number of M&As. In 2016 M&As with a value in excess of USD 1 billion accounted for only 1% of all FDI projects, but they generated 55% of total FDI flows. Moreover, evidence suggests that FDI and exports are not competing but complementary strategies for serving foreign markets. Finally, since 2008 EU countries are no longer the world’s main FDI investors and recipients. Nevertheless, econometric analysis shows that belonging to the EU dramatically boosts FDI flows in member countries.

Economic Bulletin Issue 4, 2018
25 June 2018
Measures of underlying inflation for the euro area

Abstract

JEL Classification

C52 : Mathematical and Quantitative Methods→Econometric Modeling→Model Evaluation, Validation, and Selection

C82 : Mathematical and Quantitative Methods→Data Collection and Data Estimation Methodology, Computer Programs→Methodology for Collecting, Estimating, and Organizing Macroeconomic Data, Data Access

E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation

Abstract

Headline inflation can be noisy, blurring the signal on the medium-term inflationary pressure relevant for monetary policy. To help distinguish signal from noise in the data, central banks monitor measures of underlying inflation. As there are many ways of measuring underlying inflation, it is important to understand the properties of the various indicators and what factors may account for any divergence between them. This article describes in detail the measures of underlying inflation typically used at the ECB and evaluates them against a set of empirical criteria. Our results suggest that no one measure of underlying inflation is superior in all situations as the performance of the indicators varies over time. In practice, each indicator comes with merits and shortcomings, which calls for monitoring the full range of measures of underlying inflation.

Economic Bulletin Issue 4, 2018
10 May 2018
Real convergence in central, eastern and south-eastern Europe

Abstract

JEL Classification

E01 : Macroeconomics and Monetary Economics→General→Measurement and Data on National Income and Product Accounts and Wealth, Environmental Accounts

F15 : International Economics→Trade→Economic Integration

O11 : Economic Development, Technological Change, and Growth→Economic Development→Macroeconomic Analyses of Economic Development

O43 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→Institutions and Growth

O47 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→Measurement of Economic Growth, Aggregate Productivity, Cross-Country Output Convergence

Abstract

This article establishes stylised facts about convergence and analyses the sources of economic growth in central, eastern and south-eastern European (CESEE) economies within and outside the European Union (EU).22 It also compares the performance across countries and identifies the challenges that these economies face on the way to further advancing convergence. Although all CESEE economies have converged towards the most advanced EU economies since 2000, progress has been heterogeneous. While some countries have experienced fast economic growth and a speedy catching-up, for others the catching-up process has been rather slow. Economic convergence has been much faster in the CESEE countries that became members of the EU (including those which later joined the euro area) than in the Western Balkan countries that are currently EU candidates or potential candidates. Convergence was particularly rapid before the global financial crisis, but slowed down thereafter. The article identifies several factors that are common to the most successful countries in the region in terms of the pace of convergence since 2000. These include (inter alia) improvements in institutional quality, external competitiveness and innovation, increases in trade openness, high or improving levels of human capital, and relatively high investment rates. Looking ahead, accelerating and sustaining convergence in the region will require further efforts to enhance institutional quality and innovation, reinvigorate investment, and address the adverse impact of population ageing. For EU candidates and potential candidates, EU accession prospects might constitute an anchor for reform momentum – in particular, but not exclusively, in the key area of enhancing institutional quality – and thus support the long-term growth prospects and real convergence of these countries.

Economic Bulletin Issue 3, 2018
10 May 2018
Risk sharing in the euro area

Abstract

JEL Classification

E21 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Consumption, Saving, Wealth

E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy

F15 : International Economics→Trade→Economic Integration

F36 : International Economics→International Finance→Financial Aspects of Economic Integration

Abstract

This article discusses the concept of risk sharing, which generally refers to the notion that economic agents, such as households and firms, attempt to insure their consumption streams against fluctuations in the business cycle of their country, i.e. they try to “smooth out” changes in their consumption resulting from economic shocks. The article then considers what proportion of an economic shock in the euro area can be smoothed, and compares this with the situation in the United States. While a comparison of the degree of risk sharing between the euro area and the United States needs to be seen against the background of different institutional and political architectures, it nevertheless offers potentially interesting economic insights. The article shows that, while in the euro area around 80% of a shock to GDP growth in a given country remained unsmoothed over the period 1999-2016, thus resulting in sizeable differences in consumption growth across countries, in the United States at most 40% of a shock to state-specific GDP was unsmoothed over the same period. The article also evaluates the relative importance of the main risk sharing channels, i.e. the credit, capital and fiscal channels, as well as the role of European institutions. It shows that, in the euro area, risk sharing takes place mainly via the capital channel, i.e. through cross-border holdings of financial assets. Finally, the article puts the empirical results into the perspective of the ongoing debate on enhancing the institutional architecture of Economic and Monetary Union (EMU). It calls for euro area countries to make their economies, banking sectors and public finances less vulnerable to macroeconomic shocks. The article explains how efficient and integrated financial markets are a core prerequisite for effective private risk sharing in the euro area. It also shows how the euro area would benefit from a central fiscal stabilisation function to support national economic stabilisers in the presence of large economic shocks and thereby make EMU more resilient.

Economic Bulletin Issue 3, 2018
8 May 2018
The impact of the corporate sector purchase programme on corporate bond markets and the financing of euro area non-financial corporations

Abstract

JEL Classification

E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy

E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies

G01 : Financial Economics→General→Financial Crises

G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates

G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages

Abstract

This article reviews the impact of the ECB’s corporate sector purchase programme (CSPP) on corporate bond markets and the financing of euro area non-financial corporations (NFCs). It finds that the CSPP has led to a significant easing in financing conditions for euro area NFCs, including declines in corporate bond spreads, improved supply conditions in the corporate bond primary market and increased bank lending to NFCs that do not have access to bond-based financing. The operational set-up of the CSPP, in particular its flexibility and adaptability, minimises any impact that could be detrimental to the functioning of the corporate bond market.

Economic Bulletin Issue 3, 2018
22 March 2018
The real effects of credit constraints

Abstract

JEL Classification

G32 : Financial Economics→Corporate Finance and Governance→Financing Policy, Financial Risk and Risk Management, Capital and Ownership Structure, Value of Firms, Goodwill

E22 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Capital, Investment, Capacity

Abstract

This article reviews the existing literature on financial constraints and their effect on investment. It also provides new evidence on this issue using a large sample of firms from 12 European countries for the period 2014-17. The data come from the ECB and European Commission survey on the access to finance of enterprises (SAFE), which focuses specifically on small and medium-sized enterprises (SMEs). The available evidence suggests that credit constraints play a crucial role in the investment decisions of non-financial corporations.

Economic Bulletin Issue 2, 2018
20 March 2018
The economic impact of population ageing and pension reforms

Abstract

JEL Classification

H55 : Public Economics→National Government Expenditures and Related Policies→Social Security and Public Pensions

J11 : Labor and Demographic Economics→Demographic Economics→Demographic Trends, Macroeconomic Effects, and Forecasts

J14 : Labor and Demographic Economics→Demographic Economics→Economics of the Elderly, Economics of the Handicapped, Non-Labor Market Discrimination

E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy

Abstract

This article examines the macroeconomic and fiscal implications of population ageing in the euro area and looks at how pension reforms can help to address these challenges. According to Eurostat’s latest projections, population ageing is set to continue and even intensify in the euro area over the next few decades. This ongoing process, which stems from increases in life expectancy and low fertility rates, is widely expected to lead to a decline in the labour supply and productivity losses, as well as behavioural changes, and is likely to have an adverse effect on potential growth. Moreover, by causing increases in precautionary savings, ageing can be expected to have a dampening impact on interest rates over an extended period of time. Population ageing also entails changes in relative prices, mainly owing to shifts in demand, with demand for services rising. Furthermore, euro area countries are also projected to experience further upward pressure on public spending on pensions, health care and long-term care as their populations age. Although many euro area countries implemented pension reforms following the sovereign debt crisis, further reforms appear to be necessary in order to ensure fiscal sustainability in the long run. In this respect, measures that increase the retirement age can be expected to dampen the adverse macroeconomic effects of ageing, as they will have a favourable impact on the labour supply and domestic consumption. In contrast, increasing the contribution rate or reducing the benefit ratio could have less favourable macroeconomic implications.

Economic Bulletin Issue 2, 2018
7 February 2018
Labour supply and employment growth

Abstract

JEL Classification

J01 : Labor and Demographic Economics→General→Labor Economics: General

J21 : Labor and Demographic Economics→Demand and Supply of Labor→Labor Force and Employment, Size, and Structure

J22 : Labor and Demographic Economics→Demand and Supply of Labor→Time Allocation and Labor Supply

J61 : Labor and Demographic Economics→Mobility, Unemployment, Vacancies, and Immigrant Workers→Geographic Labor Mobility, Immigrant Workers

Abstract

This article examines the main factors behind the recent changes in euro area labour supply and how they have influenced employment developments. It finds that the increasing supply from older people and women, as well as immigration, have had a significant influence on employment growth during the economic recovery. Both migration and the numbers of older people and women in or seeking work have been driven by long-term trends and structural changes, while migration has also been affected by several cyclical factors. In the medium to longer term, labour supply is expected to decline as the population ages. This calls for policies to support labour force and employment growth, for example by helping the long-term unemployed, migrants and other groups whose participation rates remain low, to enter or return to the labour market, or find jobs that better match their skills.

Economic Bulletin Issue 1, 2018