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Contagious FTAs: New evidence on the domino theory of regionalism

Richard Baldwin, Dany Jaimovich, 2 September 2010

As WTO trade talks languish, what’s driving the surge in regional trade agreements? This column says that regionalism is being driven in large part by the domino effect, in which nations excluded from a trade agreement launch their own negotiations to redress trade diversion. This dynamic is more of a challenge to the WTO than a threat at the moment, but it should not be neglected.

Ambiguity is another reason to mitigate climate change

Simon Dietz, Geoffrey Heal , Antony Millner, 1 September 2010

The answers to “How much should people sacrifice today for the benefit of those living several decades from now?” vary widely. This column suggests that people’s distaste for uncertainty – ambiguity aversion – favours immediate, rapid cuts in greenhouse gas emissions.

Do countries “graduate” from crises? An historical perspective

Rong Qian, Carmen M. Reinhart, Kenneth Rogoff, 31 August 2010

Are declarations of victory against the global crisis premature? This column argues that “graduation” – the emergence from recurrent crisis bouts – is a long and painful process which neither developed nor developing countries look close to completing. Two centuries of evidence suggests that most countries need 50 years before the chances of further crises subside.

100 years of US obesity

Marek Brabec, John Komlos, 31 August 2010

More than one billion adults across the globe are overweight, and at least 300 million are clinically obese. This column argues that the obesity epidemic in the US has been creeping up throughout the twentieth century, much earlier than the official account acknowledges. Current US standards thereby mislead many overweight and obese youth into believing that their weight is normal when it is not.

A helicopter drop for the US Treasury

Ricardo Caballero, 30 August 2010

The US may be near a liquidity trap. This column argues that the ineffectiveness of monetary policy can be turned on its head by using money creation to finance fiscal policy stimulus – such as a large but temporary cut in sales taxes. To avoid future problems, the Treasury could commit to transfer resources back to the Fed when the economy is back to full employment. This would be a helicopter drop with a drainage contingency.

Corruption, institutions, and firm productivity

Donato de Rosa, Nishaal Gooroochurn, Holger Görg, 30 August 2010

Does it pay to be corrupt? This column presents evidence from 22 emerging economies in Europe and the former Soviet Union on the effects of corruption on firm productivity. It finds that in a highly corrupt country, bribing officials actually has a negative effect on productivity, whereas in countries with strong institutions, it can open doors that competitors dare not touch.

Interest rates and the US housing boom: A call for more research

Edward Glaeser, Joshua Gottlieb, Joseph Gyourko, 28 August 2010

The debate over the cause of the US housing boom and bust is far from concluded. This column questions the explanation that low interest rates were a critical factor, arguing that it sits uneasily alongside theories of household behaviour and historical evidence. With the causes remaining uncertain, the authors call for more research in this area.

Size matters: the global operations of European firms

Gianmarco I.P. Ottaviano, 27 August 2010

Gianmarco Ottaviano of Bocconi University talks to Viv Davies about The Global Operations of European Firms, a report that analyses data on 15,000 firms in seven countries to show that firm size, productivity, skill intensity and the ability to innovate are associated with better export performance, foreign direct investment and outsourcing. He argues that firms can improve their competitiveness within the European single market, but competing effectively in the future will require more than just exporting to neighbouring EU countries. The interview was recorded in Rome on 19 June 2010.

Prices vs quantities in the great trade collapse: New evidence

Mona Haddad, Ann Harrison, Catherine Hausman, 27 August 2010

The great trade collapse that accompanied the global crisis was historically severe. This column presents evidence from several countries suggesting that the great trade collapse was more concentrated along the intensive margin – the reduction in the value of goods already being traded – providing hope that trade may recover sooner than feared.

China and India: Those two big outliers

Jesus Felipe, Utsav Kumar, Arnelyn Abdon, 26 August 2010

Why have China and India been able to grow so quickly? This column argues that while the industrial policies pursued by both countries up until the 1980s led to gross mistakes and inefficiencies, China and India would not be where they are now without them. Their export baskets are far more sophisticated and diversified than expected given their income per capita.

A wake-up call for bank lending standards

Ralph De Haas, Neeltje van Horen, 25 August 2010

The subprime crisis and subsequent global crisis have brought bank finances firmly to public attention, with many calling for stronger regulation. This column argues that the subprime crisis offered a “wake-up call” for banks, prompting them to screen and monitor their corporate borrowers more carefully without the need for more regulation. This may have contributed to the subsequent reduction in corporate lending.

Does trade liberalisation empower women? Evidence from 1990s Mexico

Ernesto Aguayo-Téllez, Jim Airola, Chinhui Juhn , 24 August 2010

Promoting gender equality is a Millennium Development Goal. This column explores the effects of trade liberalisation in Mexico during the 1990s on the country’s gender gap. It finds that trade benefitted sectors of the economy that employ more women, such as textiles and clothing, thereby helping to raise women’s earnings and relative social status.

Healthcare competition saves lives

Marty Gaynor, Carol Propper, 23 August 2010

Governments faced with rising costs and growing demand are constantly searching for methods of delivering higher productivity in healthcare. This column suggests that the introduction of competition among UK hospitals – yet with a fixed price – has lowered death rates without a commensurate increase in costs.

Is concern for the environment a luxury good? Evidence from Google searches

Matthew E. Kahn, Matthew J. Kotchen, 21 August 2010

Is concern for the environment a luxury good? This column presents data from Google searches for the words “unemployment” and “global warming” by US users. It argues that recessions increase concerns about unemployment at the expense of people’s interest in climate change – in some cases leading them to deny its existence.

The Dodd-Frank Act, market-based measures of systemic risk and stress tests

Viral Acharya, 20 August 2010

Viral Acharya talks to Viv Davies about the Dodd-Frank Act and his recent work on capital requirements, market-based measures of systemic risk and stress tests. He highlights the new NYU Stern Systemic Risk Rankings of US financial institutions, which use the Marginal Expected Shortfall (MES) as its basis. Acharya discusses the shortcomings of the Basel III proposals and compares the recent European stress tests with those undertaken in the US. He highlights the importance of international coordination in the areas of derivatives, and agrees that financial reform compliance will require a cultural shift in the banking system.

Strengthening the financial system: The benefits outweigh the costs

Stephen Cecchetti, Benjamin H Cohen, 20 August 2010

The extent of the damage from the global crisis has forced policymakers to rethink how they regulate finance. This column first examines the long-term impact of stronger capital and liquidity requirements and then estimates the transitional economic impact as the new standards are phased in. It argues that, while such reforms may come at a short-term cost, the benefits of a stronger and healthier financial system will be around for years to come.

Producing superstars for the economic World Cup: New evidence from Mexico

Lant Pritchett, Martina Viarengo , 20 August 2010

In the World Cup, countries rely not on the average quality of their footballers, but on the quality of their best footballers. Could superstars also be crucial in economic competition? This column reveals that each year Mexico produces fewer than 6,000 world class mathematicians at age 15. If superstars do play any role in economic performance then this is particularly problematic, especially since the dominant policy attention is focused elsewhere.

Welfare to work: Sticks rather than carrots

Bas van der Klaauw, Jan van Ours, 19 August 2010

Rising unemployment has forced policymakers to look for ways to get the unemployed back to work – to raise the “reemployment” rate of the unemployed. This column provides new evidence from the Netherlands suggesting that the stick of benefit sanctions is much more effective than the carrot of reemployment bonuses.

Mel Brooks and the bankers

Thorvaldur Gylfason, 18 August 2010

In Mel Brooks’ hit film and Broadway musical The Producers, those charged with making their musical a success instead try to profit from making it a spectacular failure. This column argues that some bankers may have been playing the same game in the run up to the global crisis. If so, just as in The Producers, the perpetrators should be heading to jail.

Output revisions and the stimulus debate

Jérémie Cohen-Setton, Natacha Valla, 17 August 2010

Fiscal stance is this summer’s hot topic. This column highlights that significant revisions have been made to output estimates for the 2008-2011 period without being made clear and discussed in public, while the economic foundations for applying such revisions are questionable. The debate should take the impact of these revisions into account.

 

Global Crisis Debate

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 six themes:

Macroeconomics

Moderator: Philip Lane

Institutional reform

Moderator: Francesco Giavazzi

Financial rescue and regulation

Moderator: Luigi Zingales

 

Countries in crisis

Moderator: Jon Danielsson

Development and the Crisis

Moderator: Dani Rodrik

Open markets

Moderator: Richard Baldwin


CEPR Policy Research

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Policy Insights and Reports

Competition and stability in banking

Xavier Vives

CEPR Policy Insight 50 models the trade-off between competition and stability in the banking sector. Competition might increase instability through two channels: by exacerbating the coordination problem of depositors/investors on the liability side and fostering panics; and by increasing incentives to take risk, and thus the raising probability of failure. Regulation can alleviate this competition-stability trade-off, but the design of optimal regulation has to take into account the intensity of competition.

A Safer World Financial System: Improving the Resolution of Systemic Institutions

Stijn Claessens, Richard J. Herring, Dirk Schoenmaker

Financial reform is finally emerging in the major economies but these reforms come up short on one crucial aspect – the resolution of systematically important, i.e., ‘too complex to fail’, cross-border financial institutions. The latest Geneva Report on the World Economy advocates a two-tier solution to this problem – a universal approach for closely integrated countries such as EU members, and a modified universal approach for other countries.

Rebalancing the Global economy: A Primer for Policymaking

Stijn Claessens, Simon J Evenett, Bernard Hoekman

This new eBook aims to provide policymakers and their advisers with up-to-date, comprehensive analyses of the central facets of global economic imbalances and to identify and evaluate potential national and systemic responses to this challenge.

Unequal Compliance: The 6th GTA report

Simon J Evenett

This Report of the Global Trade Alert, published to coincide with the Toronto G-20 Leaders' Summit in June 2010, presents a comprehensive global overview of protectionist trends since the last G-20 summit in September 2009.

Completing the Eurozone rescue: What more needs to be done?

Richard Baldwin, Daniel Gros, Luc Laeven

The euro’s crisis is not over. Measures taken in May were critical but they were palliatives not a cure. The Eurozone rescue needs to be completed. A new Vox eBook that gathers the thinking of a dozen leading economists on what more needs to be done.

Understanding the GATT’s wins and the WTO’s woes

Richard Baldwin

The WTO is said to be in a funk – unable to conclude the Doha Round even as its members liberalise unilaterally and regionally. CEPR's newest Policy Insight argues that tactics used to get consensus at the last Round pushed the organisation into decision-making’s “impossible trinity” (consensus, uniform rules, and strict enforcement). A Doha package with something for everyone may be found, thus defeating the impossible triangle. The big-package tactic, however, won’t help the WTO confront 21st century challenges in a timely manner; for that, at least one of the triangle’s corners must be modified.

Africa resists the protectionist temptation: The fifth Global Trade Alert report

Simon J Evenett

With the return to economic growth of many industrialised economies in either late 2009 or the first half of 2010, combined with sustained expansions in the emerging market economies, came the hope that protectionist pressures would ease in the world economy through 2010.…

Eurozone reform: A proposal

Jacques Melitz

CEPR Policy Insight No. 48 attributes the Greek-linked difficulty largely to the claim by the ECB and government officials in Eurozone member countries that the Eurozone is founded on fiscal discipline and the Stability and Growth Pact.

Some observations on 'political' in EMU

Francesco Paolo Mongelli

CEPR Policy Insight No. 47 argues that the benefits of a monetary union develop gradually over time and require policymakers to seize opportunities and perseverance in the face of adversity.

The US-Sino Currency Dispute: New Insights from Economics, Politics, and Law

Simon J Evenett

Thanks to deft diplomatic footwork, a US-China confrontation over the renminbi has been avoided. But the US Treasury has merely postponed the publication of its report on foreign currency manipulators, and the dispute may overshadow the G20 meetings in June and November. The 28 short essays in this eBook provide the best available economic, legal, political, and geopolitical thinking on the causes and likely consequences of the dispute.

Discussion Papers

Exchange Rate Regimes in the Modern Era: Fixed, Floating, and Flaky

Andrew K. Rose

Exchange rates may be one of a country's most important asset prices, and as such worthy of increased scholarly attention, argues Andrew Rose in CEPR Discussion Paper 7987. The paper presents a critical review of Klein and Shambaugh's new book, Exchange Rate Regimes in the Modern Era, and explores the theoretical and empirical challenges of comparing exchange rate regimes.

A New Keynesian Open Economy Model for Policy Analysis

Wendy Carlin, David Soskice

The aftermath of the global crisis has highlighted the need to reassess outdated open economy models like the Mundell-Fleming model. The authors of CEPR DP7979 simplify an unwieldy New Keynesian model to help non-specialists and policymakers analyze key challenges of macroeconomic policymaking in an open economy, including CPI inflation targeting and exchange rate overshooting.

Tax and multinational firm location decisions

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.

What are the real returns from a higher education?

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.

Boom-bust cycle for Poland in run-up to euro adoption?

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.

Why do we really have children?

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.

Inheritance Law and Investment in Family Firms

Andrew Ellul, Marco Pagano, Fausto Panunzi

The authors of DP6977 investigate the effect of inheritance law on investment in family firms in 32 countries.

Competition in grocery sales

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.

Efficiency in the 'market for innovation'

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.

Settling the trade/growth dispute – the impact of the Uruguay Round

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.