Joshua Aizenman, Eduardo Cavallo, Ilan Noy, 01 April 2015

An implication of the ‘precautionary saving’ hypothesis is that in countries faced with more macroeconomic volatility and risk, private saving should be higher. In the observable data, however, there is a negative correlation, particularly in developing countries. This column offers a plausible explanation for the disconnect between the precautionary theory and the empirical evidence,  based on a model with a richer account for the various modes of ‘precautionary’ behaviour by private agents, in cases where institutions are weaker and labour informality is prevalent.

Yuko Kinoshita, Fang Guo, 31 March 2015

Japan and Korea need to encourage female labour market participation to counter acute labour shortages. This column argues that following Nordic countries’ experiences, it would be possible to achieve both high female labour force participation rate and fertility rate. However, this is only possible if supported by appropriate public and private sector policies.

Peter E. Robertson, 30 March 2015

The Soviets matched the US only by spending up to 20% of GDP on the military during the Cold War. This column argues that, in stark contrast to this example, China has the potential to match the US in certain military spheres with similar burden on its economy. Using exchange rates comparisons significantly understates the Chinese military spending. A much more realistic assessment is obtained using PPP terms. If both countries spent the same fraction of their GDP on the military, the relative size of China’s military machine would be more than 90% of the US one.

Laurent Bouton, Aniol Llorente-Saguer, Frédéric Malherbe, 29 March 2015

Abstentions in European Council voting are generally treated as silent consent, but in some cases a quorum of abstentions can block an otherwise unanimous decision. This column explores the relative merits of regimes with such constructive abstention rules. It shows that such rules combine the information aggregation aspects of majority rule while still allowing for veto power.

Morgan Kelly, Cormac Ó Gráda, 28 March 2015

The Little Ice Age is generally seen as a major event in European history. Analysing a variety of recent weather reconstructions, this column finds that European weather appears constant from the Middle Ages until 1900, and that events like the freezing of the Thames and the disappearance of English vineyards have simpler explanations than changing climate. It appears instead that the European Little Ice Age is a statistical artefact, where the standard climatological practice of smoothing what turn out to be white noise data prior to analysis gives the spurious appearance of irregular oscillation – a Slutsky Effect.

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