November 2010

Tang, Xiong, 30 November 2010, 33483 reads

In recent years, hundreds of billions of dollars of investment has flowed into commodities markets. This column describes why and how commodities markets have grown so rapidly and discusses some policy implications.

Ehrmann, Fratzscher, Born, 29 November 2010, 17261 reads

In response to the financial crisis, many central banks are receiving significant new responsibilities for macroprudential supervision. Exploiting the experience of central banks with Financial Stability Reports and other financial stability-related statements, this column argues that such central bank communication can be highly effective, in particular during periods of financial stress.

Anthoff, Tol, 29 November 2010, 23704 reads

An international agreement on tackling climate change is still a long way off. One barrier often cited is that sovereign states will fail to cooperate and among the challenges is how countries would measure the impact of climate change on others. This column presents new insights in this area.

Jeanne, Korinek, 28 November 2010, 16916 reads

The damage caused by the global crisis and fiscal crises in several developed countries has rejuvenated support for regulation and has reignited research interest. This column presents one recent proposal: A Pigouvian tax to help bring the amount of debt and capital held by the financial sector closer to the socially optimal level.

Santiso, Frot, 27 November 2010, 15823 reads

Do emerging-market democracies risk destabilising financial markets every time their voters go to the polls? This column presents new evidence on the effects of elections on portfolio flows. It finds that elections diminish equity flows when they bring political uncertainty.

Huang, 27 November 2010, 14788 reads

China recently issued a set of new policy documents with the aim of stabilising prices in the country. This column asks whether these proposals are just dusted down manuscripts from the 1980s, disregarding thirty years of market-oriented reform. The term “monetary policy” is not even mentioned once.

Levin, 26 November 2010, 9374 reads

Andrew Levin of the Federal Reserve talks to Romesh Vaitilingam about his research on optimal monetary policy at the zero lower bound. They discuss the effectiveness of forward guidance, the use of non-standard measures and the interactions between monetary and fiscal policy. The interview, which was recorded at the annual congress of the European Economic Association in Glasgow in August 2010, represents Andrew Levin’s personal views. [Also read the transcript]

Manasse, Trigilia, 26 November 2010, 17349 reads

Is Italy the next European country to go? This column argues that the jury is still out, although the grace period will not extend beyond three years.

Dreher, Nunnenkamp, Öhler, 26 November 2010, 14380 reads

Performance-based aid provides a promising alternative to the failed traditional approach but hardly any empirical evidence exists on its effectiveness in inducing reforms. This column provides new evidence from the Millennium Challenge Corporation’s impact on corruption. It suggests performance-based aid can lead to reforms but only if uncertainty about the timeliness and amount of aid rewards is avoided.

Weder di Mauro, Zettelmeyer, 26 November 2010, 17392 reads

The bailout of the Irish government has turned up the heat on Europe’s leaders. This column argues that it is time for a serious debate over one possible solution: A European Sovereign Debt Restructuring Mechanism.

Auboin, 25 November 2010, 21740 reads

While liquidity has returned to the main routes of international trade, at the periphery a group of developing countries, particular low income one, are still suffering from lack of affordable trade financing. This column outlines how the recent G20 meeting in Seoul has provided a mandate to multilateral institutions to address this problem.

Rotunno, Vézina, 24 November 2010, 14393 reads

Smuggling is a pervasive phenomenon that often results in violence, distorted competition, and loss of tax revenue. This column argues that international migrant networks facilitate smuggling across borders, showing that the presence of Chinese-born migrants abroad increases tariff evasion in both China and host countries.

Acharya, Cooley, Richardson , Sylla, Walter, 24 November 2010, 30327 reads

Of the recent reforms to make financial systems more robust, the US Dodd-Frank Wall Street Reform and Consumer Protection Act stands out. Despite being broadly in favour of its proposals, this column identifies flaws in its design that fail to deal with the main causes of the crisis and that will lead to further implicit government guarantees.

Black, 23 November 2010, 26521 reads

With news that Ireland has applied for a bailout worth tens of billions or euros, the dark predictions for the future of the Eurozone grow ever bleaker. This column argues that the problems in the Eurozone’s periphery expose a flaw in its design. It proposes that the ECB set different interest rates for different member countries to help make matters better before they get any worse.

Crafts, Fearon, 23 November 2010, 18759 reads

The global crisis has been frequently compared to the Great Depression. The recession of 1937 has been less widely discussed. This column asks what lessons it can teach today’s policymakers. Its key message is that while fiscal consolidation should not be postponed, the exit strategy needs to focus on providing monetary support for aggregate demand as fiscal stimulus is withdrawn.

Campos, Coricelli, 22 November 2010, 10338 reads

Conditional cash transfer programmes are now a central part of the debate on social protection policies. So far the emphasis has been on “conditional”. This column focuses on the “cash” and suggests that it might benefit financial development – and that this possibility should be explored at the very least.

Nickel, Rother, Zimmermann, 21 November 2010, 24476 reads

Record levels of government debt in the EU have forced some countries to call for help. This column presents data from the EU between 1985 and 2009 covering episodes when governments have tried to rapidly lower public debt. It shows that appropriate policies, especially on the expenditure side, can help make this reduction sustainable.

Guerriero, 21 November 2010, 19955 reads

When is regulation more efficient than competition? This column provides a theoretical framework for thinking about these issues and explores its implications using electricity data from the US. It argues regulation can be more efficient than competition when investment inducement is salient, and that deregulation can be inefficiently implemented when consumer groups are too politically powerful.

Garcilazo, Oliveira Martins, Tompson, 20 November 2010, 27273 reads

The World Bank's Indermit Gill recently argued that economic growth will naturally be spatially unbalanced and that to try to spread it out – too thinly or too soon – would discourage it. This column responds by pointing out that economic concentration is neither necessary nor sufficient for growth.

Mourre, Turrini, 20 November 2010, 11653 reads

The latest developments in Ireland are putting further strain on the Eurozone, with some calling in to question the future of the single currency. The column looks at what the countries on the periphery of the Eurozone, Greece, Ireland, Italy, Portugal, and Spain can do to restore competitiveness.

Aghion, 19 November 2010, 15535 reads

Philippe Aghion of Harvard University talks to Romesh Vaitilingam about his research on how government interventions can encourage firms to shift from ‘dirty’ to ‘clean’ innovation, thereby sustaining growth while mitigating climate change. He describes the microeconometrics of climate change as virgin territory, where research can make a real difference to the green policy agenda. The interview was recorded at the annual congress of the European Economic Association in Glasgow in August 2010. [Also read the transcript]

Presbitero, 19 November 2010, 15263 reads

The global crisis and expansionary government reactions that followed revived the attention of policymakers and academics on the adverse effects of large public debt. This column examines the case of Heavily Indebted Poor Countries. It argues that a focus on the consequences of external debt is outdated as the share of domestic debt in total public debt in increased from 11% to 37% from 1991 to 2008. A new framework to deal with total public debt is now required to take into account domestic interest payments.

Véron, 19 November 2010, 12432 reads

The endorsement of the Basel III accord on financial regulation at the recent G20 meetings in Seoul represents one of the event’s main outcomes. This column argues that while this initiative should be welcomed, global finance cannot realistically be submitted to a single rulebook and significant challenges remain.

Altomonte, Békés, 19 November 2010, 15736 reads

The export performance of domestic firms is at the centre of many policy debates on growth and development. This column argues that in a world with global value chains and vertical specialisation, competitiveness also derives from a proper integration into international networks of production. Policymakers should care about both the import and the export capacity of their firms, and the complexity of these activities.

Ottaviano, Peri, Wright, 18 November 2010, 19124 reads

Manufacturing production and employment in the US has been in decline over recent decades, often with the finger pointed at immigration and globalisation. This column presents evidence from the US between 2000 and 2007 to show that immigrant and native workers are more likely to compete against offshoring than against each other. Moreover, offshoring's productivity gains can spur greater demand for native workers.

Zedillo, 18 November 2010, 12690 reads

How should we judge the 2010 Seoul G20 meeting? A failure, according to this column. It argues that the G20’s failure to coordinate economic policies puts the global economy at risk and that there is little in the G20 Seoul Action Plan addressing the tensions that preceded the summit.

Krugman, 18 November 2010, 271627 reads

Debt is the crux of advanced economies’ current policy debates. Some argue for fiscal expansion to avoid recession and deflation. Others claim that you can’t solve a debt-created problem with more debt. This column explains the core logic of a new model by Eggertsson and Krugman in which debt shocks and policy reactions can be examined. Relying on heterogeneous agents, the model naturally produces the paradox of thrift but also finds new supply-side paradoxes, those of toil and flexibility. The model suggests that most economists have been misthinking the issues and that actual policy in the US and EU is misguided.

Knabe, Schöb, Weimann, 17 November 2010, 22559 reads

“We were happy in those days… Because we were poor”, goes the old Monty Python sketch. This column suggests there might be some shred of truth in this joke. It finds that while unemployed people report being less satisfied with their life in general, their emotional wellbeing experienced during day-to-day activities does not seem to suffer at all.

Gennaioli, Martin, Rossi, 17 November 2010, 16038 reads

Recent sovereign defaults in developing countries have put severe strain on the defaulting country’s banking system. This column argues that these events teach us how the development of private financial markets plays a critical role in reducing the risk of government default and thus in supporting public borrowing.

Chauvet, Collier, Duponchel, 16 November 2010, 12040 reads

The end of war is the beginning of a new set of challenges for aid workers. This column asks whether this is the best time to start aid projects. Examining project-level data from the World Bank, it finds that post-conflict aid is more effective, though this is not true for all projects and the advantage erodes over time.

Chopra, Bakker, 16 November 2010, 12232 reads

The crisis in Europe is more commonly used to refer to debt crises in southern Europe than elsewhere. This column focuses on central and eastern Europe, arguing that while the crisis there was triggered by external shocks, it is clear that domestic imbalances and policies also played a key role.

Melitz, 16 November 2010, 11569 reads

Earlier this year, the fiscal situation in Greece caused turmoil across Europe. This column examines why the financial difficulties of several state governments in the US are not having similar impacts on its economy.

Bossone, 15 November 2010, 9611 reads

The G20 meeting in Seoul last week still leaves many issues unresolved. This column addresses the G20 leaders and calls for global governance that can meet the needs of a global economy.

Etro, Tarantino, 15 November 2010, 12671 reads

Europe is discussing how to regulate standardisation agreements in high-tech sectors. This column warns of a dangerous bias against early licensing agreements and proprietary technologies that would be detrimental to innovation and to the optimal selection of standards.

Papaioannou, Michalopoulos, 15 November 2010, 26686 reads

How much influence did colonisation have on Africa’s development? This column examines data from before colonisation up to the modern day and argues that differences in colonial institutions do not explain differences in regional economic performance. Instead, it finds that pre-colonial political centralisation and ethnic class stratification have a significantly positive impact on local development.

Bertocchi, Dimico, 14 November 2010, 69473 reads

US commentators regularly lament the country’s racial and ethnic inequality. This column presents data from 1870 and 1940-2000 to argue that the divide has its roots in the slave trade and that its legacy persists today through the racial inequality in education.

Pooran, 14 November 2010, 10364 reads

Will the US Dodd-Frank Act work? This column argues that unless institutional oversight shifts from the current fragmented structure to a federal one, the Dodd-Frank reforms could be prevented from having any significant positive effect on the surveillance of the financial system.

Gersbach, 14 November 2010, 9938 reads

How can excessive public debt be avoided? This column proposes a novel solution: “vote-share bonds”. These government bonds are tied to the share of the vote that the adoption of the underlying deficit has received in parliament. A bond with a higher vote-share is considered senior. Vote-share bonds inspire fiscal responsibility, while retaining the flexibility to stabilise negative macroeconomic shocks.

Gibson, McKenzie, 13 November 2010, 15519 reads

The debate over immigration often highlights the effects on the native population. This column instead looks at the country that immigrants leave behind. It presents a multi-year evaluation of New Zealand’s seasonal migration programme. In its first two years, the main developing countries supplying workers to the programme have seen a large improvement in household wellbeing.

Gylfason, Wijkman, 13 November 2010, 11178 reads

Since discovering oil in 1990, Equatorial Guinea has experienced massive growth that multiplied its GDP per capita many times over. But its oil wealth has not improved the well being of most of its inhabitants. This column argues that such resources belong to the citizenry under international law, and unelected governments that expropriate natural wealth are violating human rights.

Alesina, 12 November 2010, 19476 reads

Many nations are in the middle of painful fiscal retrenchments. This column presents recent research on the impacts of these policies. It argues that spending cuts are less recessionary than tax increases when deficits are reduced and responds to criticisms of these findings in the recent IMF World Economic Outlook.

Evenett, 12 November 2010, 9710 reads

The Seoul summit marks the end of the second year of the G20's crisis-related activities. This column takes stock of the G20's accomplishments and methods of operation, identifying what can reasonably be expected of the G20 over the medium term. It argues that a series of evolving accommodations – articulated imprecisely to outsiders – is the most that governments and analysts should expect.

Wildavsky, 12 November 2010, 7544 reads

Ben Wildavsky of the Kauffman Foundation talks to Romesh Vaitilingam about his book ‘The Great Brain Race: How global universities are reshaping the world’. Among other things, they discuss higher education funding and student finance, the rapidly growing international mobility of students and faculty, and the potential problem of ‘academic protectionism’. The interview was recorded at the London School of Economics in October 2010. [Also read the transcript]

Editors, 12 November 2010, 8554 reads

The ongoing G20 summit addresses a wide range of economic policy questions. While some are familiar topics about which there is a professional consensus, several of the issues put political leaders at the far edges of our economic understanding. A series of Vox columns by leading economists has marshalled the best available theory and empirics to help illuminate the choices facing world leaders this week in Seoul. As a service to readers in a hurry, this column provides links to the most recent contributions.

Freytag, du Plessis, 12 November 2010, 14254 reads

President of the World Bank, Robert Zoellick, caused a stir this week by hinting at a need to return to the gold standard. While supporting the drive for pro-growth policies and the desire to maintain an open international trade system, this column argues that a return to gold would struggle to achieve this and could even be a destabilising force.

Li, Whalley, 11 November 2010, 15476 reads

Over the last decade, China has been the target of more antidumping measures than any country in the world. This column examines the impacts and argues that China should be paying more attention to measures that come from its main trading partners.

Fuchs, Klann, 10 November 2010, 20084 reads

This year’s Nobel Peace Prize was awarded to Liu Xiaobo, the human rights activist who is currently a prisoner in China. Beijing has condemned the decision, saying it will harm relations with Norway. This column argues this threat should be taken seriously. It shows that receiving the Dalai Lama, who is perceived as a threat by the Chinese, can decrease exports to China by as much as 8.1%.

Imbs, 10 November 2010, 15180 reads

What makes the global crisis global? This column argues that the interdependence of the global economy, brought about by financial linkages between developed countries as well as goods trade ties with developing countries, has made the global crisis the first global recession in decades.

Bovi, 10 November 2010, 11544 reads

Workers across Europe are suffering from what economists are calling a dual labour market. One side with permanent jobs, sheltered from risk, leaving the other side – the temporary workers – exposed to the vagaries of the market. This column argues that policymakers need to consider a third dimension – the shadow labour market. If they do not, the column warns that policymakers could make things far worse.

Pudney, 09 November 2010, 15936 reads

More than one in five Europeans has taken cannabis at some point in their lives. This column explores the issues facing policymakers trying to deal with marijuana.

Anderson, Martin, Nelgen, 09 November 2010, 24420 reads

The recent rise in the price of wheat has brought the issue of food security back to public attention. This column discusses how policymakers can avoid the temptation to place restrictions on exports and imports that exacerbate price spikes.

Editors, 09 November 2010, 9156 reads

In preparation for this week’s meeting of the G20, CEPR recently held a major conference on financial regulation – The Future of Regulatory Reform – bringing together senior policymakers, leading academics and industry practitioners. This column presents a report and video highlighting some of the speakers’ key recommendations.

Moore, Prusa, 08 November 2010, 13392 reads

Last month the US Department of Commerce announced a series of proposals to strengthen the enforcement of US trade laws. This column argues that these proposals will directly undercut President Obama’s trade commitments announced in his 2010 State of the Union Address – reducing access to critical inputs for US firms and increasing the chances that they face the same treatment abroad. It begs US policymakers to reconsider.

Evenett, 08 November 2010, 10318 reads

The Korean hosts of this week's G20 summit are apparently keen to raise the profile of protectionism and to develop a development-friendly trade initiative. With these possible goals in mind the Eighth Report of the Global Trade Alert, published today, assesses the global state of protectionism, the quality of G20 leadership on trade, and the harm done to the most vulnerable developing countries by other country's beggar-thy-neighbour policies.

Aizenman, Pasricha, 07 November 2010, 15223 reads

Amid government concern over public debt, one measure – the debt-to-GDP ratio – has gained prominence above all others. This column presents forecasts of the fiscal burden of debt for each OECD country. Looking at past as well as current data, it argues that prudent fiscal policy should involve both short-term stabilisation and forward-looking fiscal reforms. Finding a balance between the two is crucial.

Razin, 06 November 2010, 13640 reads

The growing voice of skilled workers and the retired in industrialised countries is calling out for politicians to further restrict immigration in order to allay fears of stealing jobs and scrounging off benefits. This column explores the political process behind constraints to migration and describes the importance of cross-country coordination in a post-crisis world of ageing generous welfare states.

Blanchard, 05 November 2010, 14245 reads

Olivier Blanchard, economic counsellor at the IMF, talks to Romesh Vaitilingam about the two ‘rebalancing acts’ needed for a strong global recovery and the particular challenges facing the US, Europe and the emerging market economies. He also discusses fiscal consolidation, financial reform and ‘currency wars’. The interview was recorded on 4 November 2010 at the Centre for Economic Performance in London, where Blanchard was delivering a special lecture on ‘The State of the World Economy’. [Also read the transcript]

Campos, Proto, Estrin, 05 November 2010, 23475 reads

Conventional wisdom says that corruption hurts the economy because it taxes investment and weakens public services. This column presents evidence from interviews with CEOs in Brazil. It argues that corruption acts as a barrier to entry, with potential entrants put off by the uncertainty over what bribes to pay and when to pay them.

Portes, 04 November 2010, 23379 reads

The threat of a currency war between the US and China is one of the main concerns for the G20 ahead of this month’s meeting in Seoul. This column say that while policymakers appear to grasp some of the issues, they underestimate the impact of quantitative easing by large economies on exchange rates worldwide.

Etro, 04 November 2010, 26423 reads

Looking at the contracts for large oil paintings in Italy (1550-1750), this column finds evidence of strong competition between painters. Contracts were structured to address moral hazard problems, and prices closely reflected demand and supply conditions in an integrated market.

Suominen, 03 November 2010, 11283 reads

Will financial regionalism damagingly fragment the global financial architecture precisely at the time when sturdy system-wide management is needed? This column points to the world trading system’s engagement with regional trade agreements as a source of lessons for how to harmonise regional and global approaches to international finance.

Legrain, 02 November 2010, 30900 reads

While the debate over global imbalances often focuses on China, this column argues that the biggest threat to the world economy comes from the other side of the seesaw – the US.

Editors, 02 November 2010, 9712 reads

Raghuram Rajan's book ‘Fault Lines: How Hidden Fractures Still Threaten the World Economy’ has been awarded the Financial Times and Goldman Sachs Business Book of the Year 2010. He discussed the book in a Vox Talks interview recorded in July 2010, outlining the deep systemic problems in the world economy that threaten further financial crises – high US inequality, patched over by easy credit; excessive stimulus to sustain job creation in times of downturn; and the choices of Germany, Japan and China to focus on export-led growth rather than domestic consumption.

Nitsch, Berger, 02 November 2010, 13352 reads

What can policymakers do to redress the global imbalances? This column presents evidence from 18 European countries over the past 60 years. It finds that while permanently fixed nominal exchange rates often result in large and lasting trade imbalances, these imbalances usually reflect a difference in trade competitiveness that can be addressed through structural and macroeconomic policies.

Bergsten, 01 November 2010, 19342 reads

Yiping Huang recently argued that the US would not win a currency war over global imbalances. This column agrees that a currency or trade war would be lose-lose. But it says that such a conflict is inevitable unless the root causes of the growing imbalances are addressed

Reisen, 01 November 2010, 15625 reads

The debate over global imbalances has a sharp focus on China. But this column says the debate is missing a crucial point: that China’s growth has been good for poor countries, so that a renminbi appreciation slowing Chinese growth will also hurt many other poor economies.

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