Roger Douglas, Robert MacCulloch, 25 May 2017

The future of publicly funded welfare states is in doubt as costs trend upward, yet there is little agreement about the shape of the necessary reforms. This column uses the case of New Zealand to show how tax cuts can be designed to establish compulsory savings accounts so that a publicly funded welfare system can be changed into one that relies largely on private funding. Transparent pricing of services can be introduced, offering the potential for efficiency gains. The government retains sufficient revenues to act as ‘insurer of last resort’ for those individuals unable to meet welfare expenses out of their savings accounts.

Randolph Bruno, Nauro Campos, Saul Estrin, 25 May 2017

The economic effects of foreign direct investment are generally expected to be positive for the host economy. However, this is usually conditional on certain thresholds of development being met, for instance in terms of human capital or institutional quality. This column argues that the economic impact of foreign direct investment is less ‘conditional’ than commonly thought, perhaps because below the thresholds, the difference between private and social returns is substantial, while above them it is smaller.

Lubos Pastor, Pietro Veronesi, 25 May 2017

Since 2000, political uncertainty has had a strong influence on market volatility in the US. Since Donald Trump became president, however, high policy uncertainty has not translated into high market volatility. Building on a theoretical framework linking stock prices and political news, this column argues that the US market does not respond to political uncertainty because political news coming from the new administration has been unreliable and difficult for investors to interpret. 

Brunella Bruno, Giacomo Nocera, Andrea Resti, 24 May 2017

Bank risk-weighted assets differ significantly across banks. Using a unique database covering Europe’s top 50 banking groups, this column argues that national segmentations explain a significant (albeit decreasing) share of this variability. Furthermore, institutions that rely more heavily on the internal ratings-based approach have reduced more (or increased less) their corporate loan portfolio. This effect is somewhat stronger for banks located in Eurozone periphery countries during the 2010-12 sovereign crisis.

Teunis Brosens, 24 May 2017

Much progress has been made in recent years to improve the financial integration of the Eurozone.  This column argues that while banking union promotes stability, markets remain fragmented and consumers aren’t yet fully enjoying the fruits of integration. With Brexit on the horizon, it is up to the remaining EU member states to foster competition and efficiency in financial services by completing the banking union, harmonising national regulation, and accelerating the realisation of a true capital markets union. 

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