Elizabeth Currid, 3 July 2009
Elizabeth Currid of the University of Southern California talks to Romesh Vaitilingam about her book, The Warhol Economy: How Fashion, Art and Music Drive New York City, which describes the inner workings of New York’s creative industries, the significant economic value they generate and the implications for policy-makers wanting to foster their own cultural economies. The interview was recorded in London in June 2009
Daron Acemoglu, Davide Cantoni, Simon Johnson, James A Robinson, 2 July 2009
Can external agents successfully impose significant institutional reforms? Many economists are sceptical. This column assesses major reforms the French imposed upon their conquered European neighbours in the years after the French Revolution. The reforms, imposed suddenly without concern for being “appropriate to local conditions”, appear to have spurred significantly faster economic growth.
Francesco Columba, Wanda Cornacchia, Carmelo Salleo, 1 July 2009
As discussed in the first column in this series, greater leverage and incentives encouraging managers to take excessive risks drove a pro-cyclical new financial accelerator. This column discusses policy options to keep those forces in check.
Hugo Benítez-Silva, Selcuk Eren, Frank Heiland , Sergi Jiménez-Martín, 30 June 2009
How did we get a housing bubble? This column describes how well households predict the market values of their homes. Most homeowners overestimate the value of their properties by 5% to 10%, primarily due to the large expected capital gains implicit in the self-reported home values. Overly optimistic expectations about the evolution of house prices may have planted the seed of the current mortgage crisis in the US.
Francesco Columba, Wanda Cornacchia, Carmelo Salleo, 30 June 2009
The current crisis has made obvious the power of the financial sector to amplify business cycle dynamics. This column, the first half of a series, focuses on how leverage, capital regulation, and managers’ incentives contributed to the crisis.
Denis Drechsler, David Hallam, 29 June 2009
Foreign acquisitions of farmland in Africa and elsewhere have become a cause of concern. This column says that international investments are inevitable – the question is how to reconcile the objectives of land purchasers with the investment needs of developing countries.
Guillermo Calvo, Rudy Loo-Kung, 29 June 2009
The financial sector is prone to crises, which are typically associated with serious effects on output and employment. This column weighs the costs and benefits of financial deregulation that spurs temporarily high growth that then collapse and suggests that bubbles may be socially efficient.
Jakob de Haan, Jan-Egbert Sturm, 27 June 2009
Should informed observers pay attention to the ECB President? This column says it is worthwhile for financial market participants to read the ECB President’s lips, as this adds information about upcoming interest rate decisions that is not provided by expected inflation and expected output growth.
Gilbert E. Metcalf , 27 June 2009
Nearly all economists agree that the most efficient way to address environmental problems is to raise the cost of the pollution-generating activity, but US policies subsidise clean-energy alternatives instead. This column criticizes that approach – subsidies lower the cost of energy, play favourites with technologies, are often inframarginal, and frequently interact in unexpected ways with other policies.
Frank R. Lichtenberg, 27 June 2009
Many healthcare policymakers and analysts are focused on controlling rising medical costs. Is attacking high-cost, low-benefit medical innovation a solution? This column estimates that medical innovation – the use of advanced diagnostic imaging, newer drugs, and higher-ranked physicians – significantly increases life expectancy without raising medical expenditures per capita.
Matteo M. Galizzi, Maurizio Lisciandra, 27 June 2009
Want to encourage higher voter turnout in European Parliament elections? This column proposes allocating seats to member countries in proportion to their voter participation.
Gilles Saint‑Paul, 26 June 2009
Gilles Saint-Paul of the Toulouse School of Economics talks to Romesh Vaitilingam about his work on the evolution of people’s beliefs about the market economy – how it affects occupational choice; how it is influenced by intellectuals who may be biased against the market economy; and how this all plays out in public debate about economic reform, particularly in France. The interview was recorded at the Royal Economic Society’s annual conference at the University of Surrey in April 2009.
Marc Flandreau, Norbert Gaillard, 26 June 2009
How did the rating agencies come to have such a prominent role in the regulation of securities? This column traces their history back to the Great Depression. Ironically, the agencies became a regulatory instrument to address concerns about securities originators’ conflicts of interest, the very problem plaguing the agencies today. The lesson may be that no fixed regulatory solution is durable in the long run.
Pushan Dutt, Daniel Traça, 25 June 2009
Would reducing corruption increase trade? While corrupt customs officials extorting bribes from exporters may impede trade, those who take bribes to circumvent formal trade barriers may help it. This column estimates that when tariffs exceed 25%, the pro-trade effects of corruption may dominate.
Alex Edmans, Xavier Gabaix , 24 June 2009
Many blame executive compensation for encouraging shortsighted risk-taking. This column argues that compensation should be structured so as to provide incentives consistent with the firm’s position and long-term interest. It proposes “incentive accounts” that it says would be superior to existing compensation schemes.
Avinash Persaud, 24 June 2009
Policymakers embraced the rhetoric of macro-prudential regulation in response to the crisis, but most of their proposals have just suggested more micro-prudential regulations of the sort that already failed. This column criticizes those proposals and outlines what real macro-prudential approaches would look like.
Patrick Gaulé, Nicolas Maystre, 23 June 2009
Are freely availably scientific papers better disseminated? Many believe so, but this column presents new evidence suggesting that the higher number of citations received by open access papers is mostly due to a difference in quality. Nevertheless, there is a problem of access to the scientific literature in developing countries that needs to be addressed.
Tito Boeri, 23 June 2009
Public opinion is turning against migration during the recession, as generous European welfare states make migrants a potential fiscal burden. This column warns against the excessively exclusionary solutions to which voters are turning and suggests decoupling migration and the welfare state.
Eduardo Levy-Yeyati, 22 June 2009
Latvia has been hard hit by the global crisis and faces an unsustainable currency peg. Should the country float its currency, adopt the euro, or try a contained devaluation? This column assesses the options and says that the latter is most realistic, in that it will address the concerns of the EU, IMF, and Latvia.
Sebnem Kalemli-Ozcan, Elias Papaioannou, Jose Luis Peydro, 20 June 2009
What was the payoff to adopting the euro? This column says that financial integration, measured as bilateral bank holdings and transactions, increased by 40% more amongst eurozone members than countries that stayed out. It attributes that growth to the euro’s introduction eliminating exchange rate risk and coinciding with financial regulatory harmonisation.
Barry Eichengreen, Kevin H. O’Rourke, 4 June 2009
This is an update of the authors' 6 April 2009 column comparing today's global crisis to the Great Depression. World industrial production, trade, and stock markets are diving faster now than during 1929-30. Fortunately, the policy response to date is much better. The update shows that trade and stock markets have shown some improvement without reversing the overall conclusion -- today's crisis is at least as bad as the Great Depression.
Views 279555
James J. Heckman, Paul A. LaFontaine, 13 February 2008
Official statistics for US high school graduation rates mask a growing educational divide. This column presents research showing that a record number of Americans are going to university – while an increasing number are dropping out of high school. This poses major social challenges for the United States.
Views 56897
Stephen Cecchetti, 15 August 2007
A revised and updated version of the 13 August column on the basic how's and why's of what the Fed has been doing to calm financial markets.
Views 42190
Jeffrey Frankel, 18 March 2008
One of the world’s leading international economists explains how the euro could surpass the dollar as the premier international currency and examines the geopolitical implications of such a shift.
Views 36355
Stephen Cecchetti, 13 August 2007
Here are the basic how's and why's of what the Fed has been doing to calm financial markets.
Views 33726
Carmen M. Reinhart, 15 March 2008
We may just have started to feel the pain. Asset price drops – including housing – are common markers in all the big banking crises over the past 30 years. GDP declines after such crises were both large (-2% on average) and protracted (2 years to return to trend); in the 5 biggest crises, the numbers were -5% and 3 years. This column, based on the author’s testimony to the Congress, picks through the causes and consequences. It argues that when it comes to ‘cures,’ it would be far better to get the job done right than get the job done quickly.
Views 27706
Richard Baldwin, 2 October 2007
As the dollar has started to slide, the question is: how far, how fast? This column, which is based on Paul Krugman’s recent Economic Policy article suggests the answers are: pretty far and pretty fast.
Views 27578
Daniel Gros, Stefano Micossi, 20 September 2008
The radical moves in the US have direct implications for European banks and indirect implications for European governments. This column discusses the likely channels and notes that several European banks are both too big to fail and may be too big to be saved by their national governments alone.
Views 26991
Nicholas Bloom, Max Floetotto, 12 January 2009
A key source of the today’s economic weakness is uncertainty that led firms to postpone investment and hiring decisions. This column, by the authors whose model forecast the recession as far back as June 2008, report that the key measures of uncertainty have dropped so rapidly that they believe growth will resume by mid-2009. This means any additional economic stimulus has to be enacted quickly. Delaying to the summer may mean the economic medicine is administered just as the patient is leave the hospital.
Views 25537
Jon Danielsson, 12 November 2008
Iceland’s banking system is ruined. GDP is down 65% in euro terms. Many companies face bankruptcy; others think of moving abroad. A third of the population is considering emigration. The British and Dutch governments demand compensation, amounting to over 100% of Icelandic GDP, for their citizens who held high-interest deposits in local branches of Icelandic banks. Europe’s leaders urgently need to take step to prevent similar things from happening to small nations with big banking sectors.
Views 24488
Stijn Claessens, M. Ayhan Kose, Marco E. Terrones, 7 October 2008
The house and equity price busts on top of a credit crunch make this an unprecedented crisis for the modern US economy; its real economy effects are thus difficult to assess. This column provides insights based on evidence from 122 recessions in 21 advanced nations since 1960. Findings suggest recessions in such circumstances are much costlier and slightly longer. But the outcome can be affected by policy, and it’s high time that policymakers act swiftly and decisively.
Views 22931
Barry Eichengreen, Richard Baldwin, 9 October 2008
Without rapid and coordinated action by G7/8 leaders, this financial crisis could turn into a jobs crisis, a pension crisis and much more. This column introduces a collection of essays by leading economists on what the G7/8 leaders should do this weekend. The dozen essays present a remarkable consensus on a few points: we need immediate, coordinated global action that includes recapitalisation of the banks.
Views 22807
M Daniele Paserman, 26 June 2007
Female tennis players play more conservatively and commit more unforced errors when playing critical points. Does this explain the upper-echelons wage gap?
Views 22696
Paul Krugman, 15 June 2007
It’s no longer safe to assert that trade’s impact on the income distribution in wealthy countries is fairly minor. There’s a good case that it is big, and getting bigger. I’m not endorsing protectionism, but free-traders need better answers to the anxieties of globalisation’s losers.
Views 22478
Francesco Giavazzi, 2 June 2008
There has been a persistent spread between the rate at which banks lend each other money and government-backed securities yields in recent months. This column describes hypotheses explaining the spread – including the possibility that banks aren’t lending in order to bankrupt acquisition targets.
Views 22032
Alberto Alesina, Richard Baldwin, Tito Boeri, Willem Buiter, Francesco Giavazzi, Daniel Gros, Stefano Micossi, Guido Tabellini, Charles Wyplosz, Klaus F. Zimmermann, 1 October 2008
This is a once-in-a-lifetime crisis. Trust among financial institutions is disappearing; fear may spread. Last week’s US experience showed that saving one bank at a time won’t work. A systemic response is needed and in Europe this means an EU-led initiative to recapitalise the banking sector. Unless European leaders immediately unite to address this crisis before it spirals out of control, they may find themselves fighting over how best to salvage the aftermath.
Views 21573
Willem Buiter, Anne Sibert, 26 February 2008
Barack Obama, the likely Democratic presidential candidate, has proposed tax breaks for US corporations that invest at home rather than abroad. This column argues that his proposal is protectionist, reactionary, and economically unsound.
Views 20900
Luigi Zingales, 21 September 2008
This weekend’s decisions will shape the type of capitalism we live with for the next fifty years. Here one of the world’s leading financial scholars, Chicago Business School Professor Luigi Zingales, argues that bailing out the financial system with taxpayers’ money is wrong. He discusses an alternative – forced debt-for-equity swap or debt-forgiveness.
Views 20586
N. Gregory Mankiw , Matthew Weinzierl, 12 June 2009
Should the income tax system include a tax credit for short taxpayers and a tax surcharge for tall ones? This column explains how the standard utilitarian framework for tax policy analysis says that individual attributes correlated with wages, such as height, should determine tax liabilities. Taller individuals should pay higher taxes. If this is objectionable, then something is wrong with the standard framework.
Views 20581
Nathan Nunn, 8 December 2007
Slavery, according to historical accounts, played an important role in Africa’s underdevelopment. It fostered ethnic fractionalisation and undermined effective states. The largest numbers of slaves were taken from areas that were the most underdeveloped politically at the end of the 19th century and are the most ethnically fragmented today. Recent research suggests that without the slave trades, 72% of Africa’s income gap with the rest of the world would not exist today.
Views 20049
Barry Eichengreen, Kevin H. O’Rourke, 4 June 2009
This is an update of the authors' 6 April 2009 column comparing today's global crisis to the Great Depression. World industrial production, trade, and stock markets are diving faster now than during 1929-30. Fortunately, the policy response to date is much better. The update shows that trade and stock markets have shown some improvement without reversing the overall conclusion -- today's crisis is at least as bad as the Great Depression.
Robert J. Gordon, 1 May 2009
When will the US economy turn around? World renown macroeconomist Bob Gordon – a member of the NBER Business Cycle Dating Committee since 1978 – documents a surprisingly robust link between the business cycle trough and the lagged peak in unemployment claims. According to this link, springtime for the US economy is just around the corner.
Willem Buiter, 29 April 2009
Is the global economy turning around? Analysing the situation across the globe, this column concludes that the only reasonably convincing evidence of ‘green shoots’ comes from China – but even that recovery is unlikely to be sustainable due to China's dependency on exports. A global flu pandemic, if it were to occur, would act as a negative supply and demand shock.
Olivier Accominotti, 23 April 2009
China’s “dollar trap” has many analysts worried about its future resolution. This column discusses a similar situation in the 1920s when France held more than half the world’s foreign reserves. France’s “sterling trap” ended disastrously. Sterling suffered a major currency crisis, French authorities lost a lot of money, and subsequent policy reactions deepened the Great Depression.
Ricardo Caballero, 20 April 2009
The approaching release of stress-test results is accompanied by widespread fears that the tests are not rigorous enough. This column argues that a modification to the Capital Assistance Programme would neutralise these concerns. Banks should hold the capital implied by the central scenario, and buy government insurance to cover more extreme outcomes, thus taking the aggregate risk off the leveraged institutions and breaking the link between bad economic news and the financial sector’s health.
Robert E. Hall, Susan Woodward, 13 April 2009
The Fed’s astoundingly large increase in reserves has many worried about future inflation and wringing their hands over exit strategies. This column argues that the Fed can control inflation by varying the interest rate it pays (or charges) banks on their reserve holding. Consequently, the Fed’s exit strategy need not be constrained by concerns about inflation – reserve interest-rate policy can take care of inflation, but the Fed should publically announce this policy.
Guillermo Calvo, 6 April 2009
The G20 communiqué revealed a clear attitude towards chain-reaction crises. Here one of the world’s most experienced and insightful crisis-watchers argues the G20 communiqué reflects a major improvement in the way leaders view financial crises – moving away from the view that blames the victims and towards a view that recognizes systemic crises and chain-reaction accidents involving many innocent bystanders.
Mallika Ishwaran , 4 April 2009
G20 leaders met at the London Summit against a backdrop of rapidly shrinking global capital and trade flows. This column – written by a senior economist working within the UK Cabinet Office – argues that the proposals agreed at the London Summit provide much needed support to the global economic system, and to emerging and developing economies in particular, and are a step towards the creation of more effective and credible institutions for the future.
Richard Baldwin, 4 April 2009
G20 leaders made a number of commitments on trade in their London Communiqué. This column argues that the anti-protection pledge is more credible than the one agreed in the Washington Declaration. The commitment on the Doha Round, by contrast, was pitiful.
Charles Wyplosz, 3 April 2009
Did the Summit succeed? This column argues that, except for the promises of more resources for the IMF, the summit did not move the agenda forward. Doing more was probably impossible, but now national governments must do more at home, and very urgently. It would be a tragedy if the Summit outcome encouraged complacency.
Avinash Persaud, 3 April 2009
Did the Summit succeed? This column argues that the G20 Summit is not the turning point, but it provides the strongest reason yet to be less pessimistic. The commitments may leave plenty of room for the devil to make mischief with, but it is hard to think what more the G20 could have done. Gordon Brown has pulled some large rabbits from his hat.
Jeffrey Sachs, 3 April 2009
The G20 is an accomplishment beyond what many expected. This column argues, however, that G20 actions will not stop the recession and that the policy framework adopted is only a sketch. There is hard work ahead translating the G20 achievements into practical action. Communiqués are but a start, not a finish, of the process of true global cooperation.
Jonathan Portes, 2 April 2009
The long awaited London Summit of G20 leaders took place on April 2. This column – written by a senior economist working within the UK government on the Summit – sets out the background, what was agreed, and what will happen as a result.
L Alan Winters, 2 April 2009
The crisis, started by rich nations, is now harming developing nations. In this column, Alan Winters – one of the world’s leading trade and development economists and now chief economist of the UK’s Department for International Development – argues that Summit commitments show that development and developing countries are at the heart of G20 leaders’ vision for the twenty-first century.
Vicky Pryce, 2 April 2009
With global trade flows collapsing and murky protection spreading, the G20 had much to talk about on trade. This column, written by the Head of the UK Government Economic Service, argues that the Summit made important steps. The key commitments were to refrain from imposing new protectionist measure, to get the Doha round back on track, and to fund additional financing mechanisms for trade credit. These commitments require follow up and further action.
Ricardo Caballero, 26 March 2009
After unloading toxic assets, many banks will need new capital. This column proposes raising private capital to invest in distressed banks’ new equity using a mechanism similar to the Legacy Assets Program recently announced by Geithner. Since equity markets are more liquid, the leverage ratio and the public-equity participation in this new plan would be much smaller, e.g. the leverage ratio capped at two and the public-capital participation at 30%.
Jeffrey Sachs, 25 March 2009
This column explains how the Geithner public-private scheme to buy toxic assets at inflated prices is – in expected value terms – a hidden subsidy to bank shareholders paid for by US taxpayers. If the toxic assets turn out to be good investments, there is no transfer, but if they turn out to be bad loans, the taxpayer is left holding the damage while the private investors walk away.
Willem Buiter, 24 March 2009
In this first of a four-column series on fiscal aspects of central banking, Willem Buiter argues that the ECB’s lack of fiscal backing is both unusual among major central banks and a severe handicap – it is a factor in why the ECB is “fiddling while the Eurozone burns” by hesitating to undertake quantitative easing started by the Fed, Bank of England, and others.
Willem Buiter, 24 March 2009
The second of this four-column series on fiscal aspects of central banking discusses the institutional constraints on quantitative easing. It argues that the ECB can and should engage in quantitative easing since its independence gives it a credible non-inflationary exit strategy. The Fed, however, seems heading for a bout of inflation stemming from Congressional pressure. Buiter argues that the Bank of England’s situation lies between.
Guillermo Calvo, 23 March 2009
Fiscal stimulus and financial regulation cannot restore credit availability. This column argues that we need a global lender of last resort to restore liquidity. In the short run, it presses for large liquidity facilities to protect emerging market economies from the risk of damaging sudden stops of capital inflows.
|
|
VoxEU.org is partnering with the UK government to collect the views of economists from around the world on what the G20 should do to fix the global economy.
Read more. There are five themes:
Moderator: Francesco Giavazzi
Moderator: Luigi Zingales
|
|
Moderator: Jon Danielsson
Moderator: Richard Baldwin
|
|
|
|
 |
|
Policy Insights and Reports
The Editors
The latest ICMB/CEPR report discusses how world leaders should think about financial regulation reform, making a number of specific proposals.
Marc Auboin
CEPR Policy Insight No. 35 lays out some recent facts and explains the decisions made at the G20 London Summit regarding the supply of trade finance.
Max Corden
CEPR Policy Insight No.34 takes a close look at the Keynesian theory underlying the policy of fiscal stimulus being undertaken or considered in many countries, led by the US.
Gary Clyde Hufbauer, Sherry Stephenson
A new CEPR Policy Insight looks at whether a change in developing countries' trade policy might relieve some of the pain from the current crisis.
Richard Baldwin, Simon J Evenett
This ebook presents concrete steps that G20 leaders should take to avoid a negative protection-recession spiral and the threat it would pose to a global recovery.
Mathias Dewatripont, Xavier Freixas, Richard Portes
This new ebook analyzes a range of policy proposals for how the G20 process and the London Summit might bring about concrete, implementable results that can restore confidence and lead the way to recovery.
Edward J. Kane
CEPR Policy Insight No. 32 attributes the ongoing financial crisis to the economic and political difficulties of monitoring and controlling the production and distribution of safety-net subsidies.
Enrico Perotti, Javier Suarez
In this new Policy Insight Enrico Perotti and Javier Suarez explain how a liquidity and capital insurance arrangement could provide emergency liquidity (and perhaps capital) and protect the economy against systemic crisis.
Andrew Felton, Carmen M. Reinhart
A second compilation of Vox columns dealing with the ongoing crisis, in three parts: How did the crisis spread around the world? How has the crisis upended traditional thinking about financial economics? How should we fix the economy and financial system?
Donato Masciandaro, Marc Quintyn
Over the last ten years the financial supervision architecture and the role of the central bank in supervision therein has undergone radical transformation. A new CEPR Policy Insight addresses three questions. Which are the main features of the supervisory architecture reshaping? What explains the increasing diversity of the institutional settings? What are so far the effects of the changing face of banking and financial supervisory regimes on the quality of regulation and supervision?
|
Discussion Papers
Salvador Barrios, Harry Huizinga, Luc Laeven, Gaëtan Nicodème
Increased globalization and decreased trade barriers worldwide have led an increasing number of corporations to expand their activities internationally. The authors of CEPR DP7047 examine the effects of host and parent country taxation on the location decisions of these multinational corporations using a range of data from 33 European countries.
Enrico Moretti
The increase in the return to education is typically measured using nominal wages. The author of CEPR DP6997 looks at housing costs for high school and college graduates and discovers that, when looking at real as opposed to nominal wages, the return to education and the increase in inequality may be smaller than previously thought.
Barry Eichengreen, Katharina Steiner
Assuming that Poland does adopt the euro, will it be able to avoid the boom-bust cycle that has afflicted other economies around the time of euro adoption? The authors of CEPR DP7027 look at the causes of these cycles and ask whether Poland's situation is any different to those of its predecessors. Their conclusions are mixed.
Francesco C. Billari, Vincenzo Galasso
Why are couples in industrialized societies having fewer children than they used to? Indeed, why are they deciding to have children at all? The authors of CEPR DP7014 seek to address these issues, focusing on the two main motives for childbearing often cited: children as a 'consumption' vs. an 'investment' good.
Andrew Ellul, Marco Pagano, Fausto Panunzi
The authors of DP6977 investigate the effect of inheritance law on investment in family firms in 32 countries.
Kathleen Cleeren, Marnik G. Dekimpe, Katrijn Gielens, Frank Verboven
Discounters, such as Lidl, operate to offer 40-60% lower prices than conventional retailers, but how much of a competetitive threat to they pose to supermarket giants? In addition to analysing "inter-format" competition between traditional supermarkets and discounters, Verboven et al. examine the competitive effect between retailers of a similar kind and the effects that local conditions can have upon the success the the two formats.
Alberto Galasso, Mark Schankerman
The 'market for innovation' - the licensing and sale of patents - is one of the principal incentives for firms to invest in R&D. In CEPR DP 6946, Galasso and Schankerman set out to examine the impact that US developments have had on market efficiency, by studying the length of patent infringement disputes and find that the US system has performed surprisingly well in recent decades.
Antoni Estevadeordal, Alan Taylor
The link between greater openness to trade and higher growth, once held sacred by economists, has come under contestation in recent years. The authors of DP6942 develop a growth model with a basis for trade in order to uncover the impressive impact trade has had upon growth of GDP, using data from before and after the Uruguay Round.
Natalie Chen, Liam Graham, Andrew J Oswald
Higher energy prices are likely to reduce profitability of industry and thus could bring about an economic downturn. The authors of DP 6937 experiment with terrorist acts as an instrumental variable, in order to examine the relationship between the price of oil, terrorist incidents and the resultant effects on profitability and margins.
Betsey Stevenson, Justin Wolfers
Surveys that have attempted to measure the level of happiness in US citizens by means of a subjective response have unveiled decreases in happiness inequality. The authors of CEPR DP6929 have used these responses to analyse the level and dispersion of happiness within and between demographic groups over the period of 1972-2006.
|
|
|
