VOX, CEPR Policy Portal

Evidence on environmental risk-pricing by banks

Hans Degryse, Roman Goncharenko, Carola Theunisz, Tamas Vadasz, 25 September 2021

The transition to a carbon-neutral economy requires firms and banks to have environmental consciousness, raising the question of how bank financing can contribute to global climate objectives. This column examines whether and how the environmental consciousness (or ‘greenness’) of firms and banks is reflected in the pricing of bank credit. The evidence suggests that firms are indeed rewarded for being green: green firms can get cheaper loans – although only when borrowing from green banks and only since the 2015 ratification of the Paris Agreement.

Quantitative easing and conventional monetary policy have similar side effects

Martin Weale, Tomasz Wieladek, 24 September 2021

Quantitative easing is often criticised due to side effects on asset price valuation and risk taking. This column compares the financial side effects of conventional monetary policy to those of quantitative easing, based on the amount of inflation generated by each policy. A systematic comparison of multiple measures of financial side effects for the euro area, the UK, and the US suggests that the side effects of quantitative easing and conventional monetary policy are roughly the same.

On the benefits of repaying

Francesca Caselli, Matilde Faralli, Paolo Manasse, Ugo Panizza, 24 September 2021

Do countries benefit from servicing their debts during times of sovereign defaults? Colombia is typically regarded as the only large Latin American country that did not default in the 1980s, but this column argues that the case of Colombia is more complex than commonly assumed. Although it had to re-profile its debts, high-level political support from the US allowed Colombia to do so outside of the standard framework of an IMF programme. In the short to medium run, Colombia benefited from avoiding an explicit default, but this strategy did not lead to long-term reputational gains.

Patent buyouts can help win the race against coronavirus mutations

Michael Stolpe, 23 September 2021

To win the critical race between vaccines and mutations, the worldwide Covid-19 vaccination campaign must mobilise economies of scale. The most effective way to do so, this column argues, is to convert the existing Covid-19 Vaccines Global Access initiative into a more generously endowed global fund. Instead of merely obtaining the surplus vaccines of rich countries, and relying on unpredictable donations, the initiative should acquire the most promising vaccine patents and offer free production licenses to every qualified vaccine and generic drug manufacturer in the global South.

Enemies of the people

Gerhard Toews, Pierre-Louis Vézina, 23 September 2021

‘Enemies of the people’ were the millions of artists, engineers, managers, or professors who were thought to be a threat to the Soviet regime solely for being the educated elite. Along with millions of non-political prisoners, they were forcedly resettled to the Gulag, the system of labour camps across the Soviet Union. This column looks at the long-run consequences of this dark resettlement episode. It shows that areas around camps with a larger share of enemies of the people among camp prisoners are more prosperous today, as captured by firms’ wages and profits, as well as night lights per capita.