The Week That Was in Europe

Artificial Intelligence has made new inroads into areas of work that were reserved exclusively for humans: conversational interaction, pattern recognition & prediction, and writing & teaching. We discuss with Carl Benedikt Frey about the implications of AI technologies for labor market outcomes going forward. Carl Benedikt is the Dieter Schwarz Associate Professor of AI & Work at the Oxford Internet Institute and the Director of the Future of Work Program at the Oxford Martin School.

We review the main decisions taken by the European Central Bank at its policy meeting on Sept. 14, 2023 & provide perspective on them.

We kick off the fall 2023 season in our "Week in Europe" series by discussing the cyclical and longer-term outlook for the Euro Area growth. We present positive and negative factors affecting growth dynamics and discuss mechanisms through which recent negative supply shocks might give rise to long-term scarring implications for Euro Area GDP. The paper we mention in the podcast is: "The Scars of Supply Shocks: Monetary Policy Implications", by Luca Fornaro and Martin Wolf. Working paper version (no paywall) https://crei.cat/wp-content/uploads/2023/04/TSS-2.pdf Publishes version: https://www.sciencedirect.com/science/article/pii/S0304393223000417

In the heart of Europe, as national governments engage in intense negotiations over the reform of fiscal rules, the future of the continent's economic stability will be determined. Olivier Blanchard, a Senior Research Fellow at the Peterson Institute, former Chief Economist of the International Monetary Fund and Professor of Economics at MIT, joins us to shed light on the diverse views and proposals shaping this crucial reform.

Various economic commentators have called for the ECB to raise its inflation objective, but central bankers in the Euro Area are reluctant to engange in a discussion about the target. We discuss both views and add insights from recent academic research about what constitutes an optimal inflation target for the Euro Area.

We discuss how trade integration affects labor market outcomes: who are the winners & losers from international trade? Where did the gains from trade end up? And how long-lasting are the effects of trade-induced labor market displacements? Our guest in this episode is Prof. David Dorn from the University of Zurich, see here for his latest research: https://www.ddorn.net/

The ECB has revised inflation forecasts strongly upwards, particularly for core inflation. We review the new ECB forecasts and the main decision taken by the ECB Governing Council. We also discuss the outlook for interest rates going forward.

We discuss about the new insights generated by so-called Heterogeneous Agent New Keynesian (HANK) models. HANK models allow taking into account household heterogeneity when analyzing monetary policy. Ben Moll is one of the founding fathers of this model classs and Professor of Economics at the London School of Economics. For readers wishing to read up on this topic, here is a non-technical summary of the insights: https://www.imf.org/en/Publications/fandd/issues/2023/03/modern-monetary-policy-kaplan-moll-violante

We discuss the contributions of Nobel Prize winning Economist Robert E. Lucas Jr. to economics, together with Juan Pablo Nicolini, his former student, coauthor and friend. We review the main aspects of his work but also hear interesting anecdotes from Juan Pablo about his life and personality. Robert Lucas died May 15, 2023 in Chicago.

Euro area manufacturing activity was surprisingly weak over recent months: we put the pullback in historical perspectiv and discuss possible factors behind it, in particular whether recent weakness is a harbinger of more structural issues in the manufacturing sector.