The Impact of the Cyclical Downturn on Long-Term Growth: Human Capital, Political Economy, and Non-Performing Loans
Résumé
As Europe emerges from the Great Recession and the subsequent sovereign debt crisis, it has to make sure that the costs of the protracted recession are temporary and that there is no adverse impact on long-term growth. I discuss three channels through which the cycle may hurt potential growth: (i) human capital, (ii) the rise of populism, and (iii) non-performing loans. I also discuss policy responses to mitigate these risks.