Global crisis

Lee Branstetter, Francesco Lima, Lowell Taylor, Ana Venâncio, 18 September 2014

Business groups and their political allies advocate deregulation as a pathway to faster growth, pointing to a strong negative relationship between regulatory barriers to entry and economic performance. This column argues that cross-sectional estimates have oversold the strength of this relationship and its implications for policy. Quasi-experimental evidence from a Portuguese policy reform shows that deregulation matters, but its impact is limited – it is not the panacea that pundits proclaim it to be.

Mercedes Delgado, Christian Ketels, Michael Porter, Scott Stern, 18 September 2014

There is a consensus among economists that ‘deep roots’ – geography, natural endowments, and institutions – are important determinants of prosperity differences across countries. This column argues that deep roots matter, but they are neither the whole story nor an excuse for political inaction today. Current policies are important – especially the broad range of policies that shape the business environment and the sophistication of companies – and they are affected but not determined by the past.

Andy Atkeson, Andrea Eisfeldt, Pierre-Olivier Weill, 17 September 2014

Entry and trading in over-the-counter (OTC) derivatives markets have received considerable attention. However, many critical questions remain unaddressed. This column describes a formal study of banks’ incentives to enter and trade in OTC derivatives markets. In equilibrium, only large banks enter to become dealers, and middle-sized banks only enter as customers. Care should be given not to reduce rents so much when dealer participation costs are high.

Jaime de Melo, Julie Regolo, 17 September 2014

The EU is about to extend economic partnership agreements signed in 2007 with countries of the Africa, Caribbean and Pacific region. Reflecting on the implementation difficulties associated with previous agreements and the minimal engagements in the upcoming ones, this column argues that these partnerships will fall short. No further integration of African economies will come out of them. Economic Partnership Agreements will have been a sideshow in the EU’s trade policy.

Janine Aron, John Muellbauer, 16 September 2014

Using aggregate data can bias estimates of exchange rate pass-through by ignoring heterogeneity in price adjustment across sectors. This column uses micro-level price data to estimate pass-through for South Africa, using actual CPI weights to reflect changes in consumption bundles. The result is a micro-based estimate of pass-through with aggregation consistent enough to interest monetary policymakers.

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