China’s diminished growth prospects are in the news and seem to spell bad news for just about everybody. This column assesses the evidence, arguing that China’s economic growth will be much slower from now on, reducing international trade. Perhaps the biggest challenge for China will be future political tensions in reconciling economic dreams with economic realities.
Robert Barro, 04 February 2016
Ross Levine, Chen Lin, Wensi Xie, 29 July 2015
Some have argued that the stock market serves as a ‘spare tire’ during banking crises by providing an alternative corporate financing channel. This column examines the claim using data for 36 countries spanning 20 years. The findings support the three core predictions of the spare tire view, suggesting that countries can insulate parts of their economy from future banking crises by designing appropriate legal frameworks.
Bastian Von Beschwitz, Donald Keim, Massimo Massa, 02 July 2015
High-frequency news analytics can increase market efficiency by allowing traders to react faster to new information. One concern about such services is that they might provide a competitive advantage to their users with potential distortionary price effects. This column looks at how high frequency news analytics affect the stock market, net of the informational content that they provide. News analytics improve price efficiency, but at the cost of reducing liquidity and with potentially distortionary price effects.
Simon Luechinger, Christoph Moser, 27 September 2012
The presidential election campaign is in full swing in the US. Whoever wins the presidential race will face the challenge of filling top positions in the federal administration. Since some political appointees traditionally come from the private sector, allegations of conflicts of interest will emerge. But are connected firms really expected to profit? This column sheds light on this issue.
Gábor Kézdi, Robert Willis, 19 December 2011
How to ordinary people form their beliefs about the economy? These beliefs then shape the decisions they make and can, if widely held, prove to be self-fulfilling. This column looks at surveys of ordinary people in the US and finds that the beliefs people hold and the reasons behind them vary almost as much as the outcomes they try to predict.
Hans Degryse, Frank de Jong, Vincent van Kervel, 24 November 2011
Financial innovation has brought about several new ways to trade equities: electronically, over-the-counter, through broker-dealer networks, and so on. But not all of the transactions are transparent, with many barely visible to outsiders – a practice known as ‘dark’ trades. This column finds that, in general, more ways to trade is a benefit, except when the trades are dark.
Andrew Rose, Christoph Moser, 09 October 2011
Who benefits from regional trade agreements? This column uses stock-market reactions to news about trade deals to argue that "natural" trading partners and poor economies benefit from such agreements.
Luis Viceira, John Campbell, Adi Sunderam, 27 October 2010
The historically low yields on Treasury bonds are the hallmark of a bubble, according to some commentators. This column analyses the relationship between bond yields, the stock market, and inflation over the past 50 years. It finds that the riskiness of nominal bonds changes over time and that investors and policymakers can use the changing stock-bond correlation as a real-time measure of inflation expectations.
Carlo Favero, Arie Gozluklu, Andrea Tamoni, 05 April 2010
Are long-run stock market returns predictable? This column shows that a forecasting model that uses a demographic variable – the ratio of middle-aged to young adults – as well as the dividend price ratio, performs “very well” in forecasting long-horizon stock market returns.
Nicholas Bloom, 04 June 2008
The credit crunch has produced significant volatility in the stock market. This column argues that the wave of uncertainty troubling the markets will likely induce a recession – and render policy instruments powerless to prevent it.