Database™ (Original version), April 2019. In this note, we will shed some light on the third issue, related to corporate profit margins. As discussed before, we will approximate the change in the profit margin as a difference between the GDP deflator and the change in the unit labor costs. Profit margins are thought to be pro-cyclical, with rising buffers during expansion, and their depletion during downturn, though this cannot be fully confirmed with the data that we have. What can be observed through the data is continuous downsizing of profit markups in the region since 2012, on average at around 1.3%. Apparently, the profitability position of the corporates was comfortable enough to allow for continuous compression across countries and time, thus absorbing the rise in ULCs without passing them through to prices. Despite the adjustment, according to the latest IMF Regional Economic Outlook for Europe, November 2019 the level of the corporate profitability for part of the region that we scrutinize, the NMSs in the EU, is assessed as comfortable at the current juncture. It seems that after-crisis, pass-through from the rising wages to inflation weakened. The IMF study in the REO, November 2019 reveals that inflation expectations, rising competition and profitability buffers can explain the broken link in the euro area and NMSs of the EU. According to our estimates, profitability buffers seem to play role in the region as a whole. This gives more comfort for the central bank  16  in pursuing an accommodative monetary policy.

In a democratic society, evaluating the design and effects of public policies fulfils different political and technical functions. First, it fosters transparency regarding political actors’ actions and their outcomes. This provides for accountability and democratic control by Parliament and citizens. Second, it enables the strengthening of the decision-making process via valuable information to enhance the effectiveness and efficiency of public policies. Therefore, when “evidence-based policies” are promoted, it is both a technical argument in favour of effectiveness and a political statement in favour of citizens’ and their representatives’ democratic control of the power. Of course, some political matters cannot solely be based on quantitative evidence or purely technical criteria. Clear limits exist, imposed by the issues’ complex nature, the availability of information and the capacity of social sciences to analyse and make reliable and unambiguous projections within the timeframes in which society requires suitable answers for the challenges it faces. And one of economists’ core tasks should indeed be to highlight those limits, so that the findings of the assessments and analyses are appropriately interpreted with the due caveats. But to acknowledge and highlight these limits (especially on the ability to assess ex ante, i.e. to foresee in real time the different outcomes that may ensue from different courses of action in the many key areas when faced with complex problems) should not check our ambition for these assessments to influence the decision-making process. While not definitive, their conclusions act as an objective reference which is relevant to achieving the intended aims of public policies.