David Hendry, 12 December 2018

The Industrial Revolution has been of vast benefit to humanity, but it came at the cost of a global explosion in anthropogenic emissions of greenhouse gases. The UK was the first country into the Industrial Revolution. Now it is one of the first countries heading out, with annual CO2 emissions per capita back below the levels of the 1860s. This column presents an econometric model of UK emissions over the last 150 years to establish what has driven them down and reveal the impacts of important policies, especially the Climate Change Act of 2008. Even so, large reductions in all the UK’s CO2 sources are still required to meet its 2050 target of an 80% reduction from 1970 levels.

Refet Gürkaynak, Burçin Kısacıkoğlu, Jonathan Wright, 12 December 2018

News affects the yield curve, but OLS regressions based on observed news have been able to explain only 40% of the movement, at best. This column proposes a method for estimating unobserved news as well. The results suggest that news explains more or less all of the yield curve changes in event windows, and that more should be done to understand the economics behind this relationship. 

Meghana Ayyagari, Thorsten Beck, Maria Soledad Martinez Peria, 11 December 2018

Macroprudential tools have been implemented widely following the Global Crisis. Using data from 900,000 firms in 49 countries, this column finds that such policies are associated with lower credit growth during the period 2003-2011. The effects are especially significant for micro, small and medium-sized enterprises and young firms that are more financially constrained and bank dependent. The results imply a trade-off between financial stability and inclusion.

Hideki Nakamura, Joseph Zeira, 11 December 2018

The fear that technological innovation will increase unemployment is not new, and various theories in response suggest technology does not necessarily pose a threat to jobs. This column goes one step further, arguing that because automation requires rising wages and that requires increasing the set of labour tasks, innovation should ultimately reduce unemployment.

Olena Havrylchyk, 11 December 2018

Lending-based crowdfunding platforms represent an opportunity for financial intermediation that is less leveraged, less prone to runs, and easier to resolve. This column reviews the regulatory regimes for such platforms in OECD countries and the European Commission’s proposal for the EU-wide passporting regime. Regulation requires a balance to be struck between a flexible approach that allows experimentation and strong supervision to address market failures. 

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