Wouter den Haan, Martin Ellison, Ethan Ilzetzki, Michael McMahon, Ricardo Reis, 27 October 2016

The October 2016 expert survey of the Centre for Macroeconomics (CFM) and CEPR invited views from a panel of macroeconomists based across Europe on Germany’s trade surplus, its impact on the Eurozone economy, and the appropriate response of German fiscal policy. More than two-thirds of the respondents agree with the proposition that German current account surpluses are a threat to the Eurozone economy. A slightly smaller majority believe that the German government ought to increase public investment in response to the surpluses. 

Stephen Redding, Esteban Rossi-Hansberg, 27 October 2016

Economic geography has typically focused on stylised settings. This column surveys a recent strand of literature that has developed quantitative models of the spatial distribution of economic activity. This ‘quantitative spatial economics’ literature has produced important methodological and theoretical insights that clarify earlier results in stylised settings. The emerging field stands to contribute substantially to economic and public ‘place-based policies’.

Allaudeen Hameed, Andrew Rose, 27 October 2016

Recently a number of both small and large economies have experienced negative nominal interest rates. This column uses exchange rate data from 2010 to 2016 to demonstrate that negative interest rates seem to have little effect on observable exchange rate behaviour in these economies. While the long-run consequences for the financial sector of negative interest rates are unknown, the short-run effects on exchange rates in the sample are negligible.

Pınar Yeşin, 26 October 2016

The IMF invests significant resources in developing models to estimate equilibrium exchange rates. This column assesses the predictive power of one vintage of IMF exchange rate models during 2006–2011. The models performed exceptionally well at predicting exchange rate movements over the medium run, which is particularly remarkable given that the period covered the unanticipated Global Crisis and the assessments were not shared publicly at the time.

Peter Cziraki, Christian Laux, Gyöngyi Lóránth, 26 October 2016

Banks' payout decisions at the beginning of the financial crisis of 2007-2009 were particularly controversial as the crisis eroded the capital of many banks. Concerns were raised that banks may have engaged in wealth transfer to shareholders, or that they may have been reluctant to reduce dividends to avoid negative signalling. This column examines these arguments using a large dataset on US bank holding companies. Cross-sectional tests do not provide clear-cut evidence of active wealth transfer. Similarly, the evidence on signalling is mixed.

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