While many will breathe a sigh of relief as President Trump departs from the White House, up to the end US voters still had more faith in him than in Joe Biden when it came to the economy. This column compares the performance of the US in various economic indicators during the (pre-Covid) Trump administration with President Obama’s final three years, as well as in the euro area, to demonstrate that the view of Donald Trump as ‘the businessman who can at least run the economy’ was mistaken. The real danger of this view is that it suggests that economic policy can best be handled by entrepreneurs – something the Italians have learnt is not the case.
Our beliefs about one another’s political attitudes tend to be substantially mis-calibrated. This column analyses the factors shaping voters’ ideas about the political attitudes of other voters among the US electorate. Starting from the premise that individuals are not equally interested in all issues, it finds that when issue salience changes, beliefs about political groups can shift dramatically even when the underlying fundamentals remain the same. Meanwhile, the removal of a perceived external threat can induce citizens to perceive one another as further apart on domestic issues, undermining a country’s social cohesion.
Despite being a central question in international macroeconomic policy debates, there is still only limited empirical evidence on the extent to which macroprudential policy affects the transmission of monetary policy and the propagation of shocks across borders. This column presents findings from the latest project of the International Banking Research Network. The interactions between monetary and macroprudential policies are shown to significantly alter cross-border bank flows across a wide range of countries, though the magnitudes differ appreciably across countries and instruments.
The dominance of Big Tech and other ‘superstar’ firms’ has put market power back on the agenda of politicians, as well as in research. But although oligopoly markets have been introduced in macroeconomic and trade models, this is mostly in the context of a very large ‘continuum’ of sectors such that a firm has market power in its sector but no influence on the wider economy. This column argues that it is high time that oligopoly is integrated fully into the macroeconomics toolbox.
Quantifying the economic damage caused by the COVID-19 pandemic and the worth of a cure can assist cost-benefit analyses of potential public-sector investment to alleviate the impact of the current pandemic. By reflecting forward-looking expectations, stock prices should indicate the economic value of progress being made towards vaccine development. This column estimates the value of a COVID-19 cure using the behaviour of stock prices and a novel vaccine progress indicator. The value of a cure is worth between 5% and 15% of wealth and rises substantially with uncertainty surrounding the frequency and duration of the pandemic. Understanding the fundamental biological and social determinants of future pandemics may be as important as resolving the immediate crisis.
Other Recent Columns:
- The impact of Covid-19 on productivity
- Trade and Covid-19: Lessons from the first wave
- The merits of fire sales and bailouts in light of the COVID-19 pandemic
- Bond returns in sovereign debt crises: The investors’ perspective
- How networks of influential individuals helped destroy one of the world’s most durable democracies and legitimise a racist, authoritarian state
- Choice and outcomes in deceased donor kidney assignment
- The triple effect of COVID-19 on Chinese exports
- Workplace integration and gender attitudes
- Robot adoption at German plants
- Increasing deposit insurance and nationalisation in times of crisis
- Commuting zones in Japan
- The disproportionate impact of lockdowns on women and the young
- Global liquidity and dollar debts of emerging market corporates
- Financial globalisation and inequality: Capital flows as a two-edged sword
- Will inflation make a comeback as populations age?
- Air pollution policy should focus on the most vulnerable people, not just the most polluted places
- The impact of social security on pension claiming and retirement
- ‘Leaning against the wind’ and the risk of financial crises
- The pandemic endgame
- Trade preferences need predictability
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