A positive supply shock in the 1990s, a negative supply shock in the 2020s

The 1990s were characterised by the opening up of trade between OECD countries and emerging countries, and by the integration into the global economy of emerging countries, particularly China. This was a significant positive supply shock, with the emergence of labour and capital resources from emerging countries (China). As expected, this resulted in more growth and lower inflation. On the contrary, the 2020s will be characterised by a negative supply shock. It results from population ageing in OECD countries, China and many emerging countries, and now Russia’s withdrawal from the global economy with the resulting loss of various commodities produced in Russia. We should therefore expect a loss of growth and higher inflation.