Two Free DP Downloads 20 February 2020 - EMERGING AND DEVELOPING ECONOMIES: Ten Years After the Global Recession & USE OF PRESCRIPTION OPIOIDS: Evidence from France of the impact of economic hardship

Thursday, February 20, 2020

EMERGING AND DEVELOPING ECONOMIES: Ten Years After the Global Recession 
Ayhan Kose, Franziska Ohnsorge   
CEPR DP No. 14405 | 12 February 2020

Although emerging market and developing economies (EMDEs) weathered the global recession a decade ago relatively well, they now appear less well placed to cope with the substantial downside risks facing the global economy. In many EMDEs, the room for monetary and fiscal policies to respond to shocks has eroded; underlying growth potential has slowed; and the momentum for improving policy frameworks, institutions and business climates seems to have slackened. 

These are the central conclusions of a new CEPR study by World Bank economists Ayhan Kose and Franziska Ohnsorge, who find that the experience of the 2009 global recession highlights once again the critical role of policy room in supporting economic activity during adverse shocks. Among the findings: 

  • Perhaps for the first time, many EMDEs were able to implement large-scale countercyclical fiscal and monetary policy during the global recession.
  • EMDEs were able to stimulate activity because they could draw on sizeable policy buffers accumulated during the pre-recession period of strong growth: government debt had fallen, current account and fiscal deficits narrowed, and inflation had moderated.
  • EMDEs with more resilient economies and with more forceful stimulus experienced milder growth slowdowns during the global recession.
  • Were a sharp global downturn to happen now, the average EMDE would be less prepared to address it than before the 2009 recession.
  • EMDEs generally are more vulnerable to external shocks, in part because of mounting debt, weakening demand for commodity exports, and slower underlying domestic growth.
  • Trade disputes among major economies are chipping away at an important engine of EMDE growth. At the same time, weaker fiscal positions would make it more difficult for EMDEs to support activity with expansionary fiscal policy.
  • Since the 1997-98 Asian crisis and the 2001 US recession – the two global downturns that preceded the 2009 global recession – policy frameworks in EMDEs have become more resilient.

Figure 1: A decade since the 2009 global recession: Growth around global recessions

Source: Grey bars indicate global recessions and slowdowns. 

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Mathias Dewatripont, Victor Ginsburgh, Michel Goldman, Patrick Legros, Ilaria Natali                
CEPR DP No. 14403 | 11 February 2020

Use of opioids in France is higher in parts of the country where the poverty rate is rising, where there is a bigger share of middle-aged people and people with only a basic education in the local population, and where population density is relatively low.

These are among the findings of new CEPR research by Mathias Dewatripont and colleagues, the first study to investigate the link between socio-economic hardship and the use of prescription opioids in a European context. Among the findings: 

  • Increases in the poverty rate induce more sales: a one percentage point increase in poverty produces, approximately, a 10% increase in opioid sales. 
  • Opioid sales are positively related to the share of middle-aged people and the share of individuals with only a basic education, while they are negatively related to population density. 
  • Middle-aged individuals and people with lower education levels are mostly at risk and should be carefully screened before and monitored after being treated. 
  • Unemployment is not significantly related to opioid consumption. Unemployment does not necessarily represent a good proxy of economic disruption, especially in France, where considerable monetary support is offered to the unemployed. 
  • Pharmacovigilance, also known as drug safety, should be more intensively addressed towards poor and rural areas. A combination of policies aimed at improving economic prospects and strictly monitoring access to opioid medications would be beneficial for reducing opioid-related harm.
  • Discrepancies in mortality rates between France and the United States may largely be attributed to deeply different regulatory systems and medical cultures. In Europe, it is strictly forbidden to advertise prescription only medicines, companies are not allowed to provide free samples and European doctors are more reluctant to use opioids. 

The authors conclude that both socio-economic factors and regulatory frameworks are crucial for explaining the opioid crisis. They represent two important facets of the same coin and policies aimed at fighting the epidemic should not translate into an ‘either-or’ between improving socio-economic status or enhancing the regulatory environment but should rather view these as complementary aspects of the same crisis.

Figure 4: Opioid-related Hospitalisations in France between 2000 and 2017


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