Policy proposals to offset the effects of global warming would be strengthened if we knew more about the net economic benefits of climate action relative to business-as-usual. This column argues that estimates may understate the future costs of business as usual because of heterogeneous seasonal effects, and because more business sectors than previously assumed suffer a negative impact from increased summer temperatures. The cost of inaction may be equal to one-third of the growth rate of US GDP over the next 100 years.
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.
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.
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’.
Ben Bernanke famously quipped that monetary policy works in practice, but not in theory. This column bridges the gap between practice and theory in assessing how central banks can influence both of them by intervening in asset markets. To the extent that asset market volatility is driven by shifts in beliefs, the central bank should aim to eliminate that volatility by engaging in countercyclical unconventional monetary policy, which would end up reducing the risk premium.
Other Recent Columns:
- Exchange rate predictability in the medium term
- Understanding bank payouts during the financial crisis of 2007-2009
- Biased technical change and labour demand: Evidence from global value chains
- New eBook: What To Do With the UK? EU Perspectives on Brexit
- Gender gap in a two-stage maths competition
- Housing cycles, real estate valuations and economic growth
- Bengt Holmström and the black box of the firm
- Firm productivity and workers’ wages
- Choosing a valuation technique: Education versus profession
- Multinational firms and business cycle co-movement
- Hours worked in Europe and the US
- Voter response to conditional cash transfers
- Secular stagnation, bubbles, fiscal policy, and the introduction of the contraceptive pill
- The trade data gap: Mistakes and malfeasance
- How import competition from China helped fuel the credit bubble of the 2000s
- Corruption doesn't grease the wheels in Central or Eastern Europe
- Why we fail to prevent civil wars
- Africa's prospects for enjoying a demographic dividend
- Income distribution and aggregate saving
- A new measure of economic asymmetries in the Eurozone