October 2009

Moser, Urban, Weder di Mauro, 31 October 2009

Do offshoring firms reduce their domestic employment? This column examines plant-level evidence from Germany, using difference-in-differences matching techniques. It says that the positive productivity effect of offshoring dominates possible downsizing effects, raising domestic employment at the establishment.

Levine, Coile, 31 October 2009

Since the crisis began, the economy has shed millions of jobs. This column explains how stock, housing, and labour market fluctuations affect retirement decisions. While wealthier workers will delay retirement, a larger number of workers will be forced into retirement because of their inability to find new jobs. This increased involuntary retirement will likely exceed any work-seeking effect of diminished stock market wealth by 50%.

Persaud, 30 October 2009

Avinash Persaud, chairman of Intelligence Capital, talks to Romesh Vaitilingam about financial regulation after the crisis, including whether it is feasible and desirable to introduce a ‘Tobin tax’ on financial transactions. The interview was recorded at the Global Economic Symposium in Schleswig-Holstein in September 2009.

Barro, Redlick, 30 October 2009

The recent global recession has made the efficacy of fiscal-stimulus packages one of the most prominent policy debates in economics today. This column finds that the multiplier of defence spending falls in a range of 0.6 to 0.8 and argues that non-defence multipliers are unlikely to be larger. It says we should be sceptical when policymakers claim government-spending multipliers in excess of one and suggests tax cuts may be preferable to spending increases.

Heal, 29 October 2009

Can renewable energy save the world from climate change, and do so at a reasonable cost? This column says we can replace some fossil fuel power with renewable power without a major cost increase, but we cannot hope to replace a major fraction of our fossil power with intermittent power sources such as wind and solar energy unless we can develop energy storage technologies.

Cecchetti, Kohler, Upper, 28 October 2009

Is the current turmoil unique? This column examines three decades of financial crises and says that it stands out. But the variation in past experiences suggests that the major economies may regain their pre-crisis levels of output by the second half of 2010.

Calvo, 27 October 2009

How did turmoil in the US subprime mortgage market ignite a global crisis? This column explains how emerging markets’ voracious appetite for international reserves coupled with record-low US policy interest rates and lax financial regulation to produce the large-scale creation of quasi-money subject to self-fulfilling-expectations runs. The theory suggests significant changes in Fed and regulatory policy are needed.

Hesse, Poghosyan, 27 October 2009

Bank balance sheets in oil-exporting economies have been hard hit recently. This column provides the first empirical evidence linking oil prices to bank performance in such economies. It suggests that easily observed oil prices could inform macro-prudential regulation in these countries and mitigate pro-cyclical bank lending.

Bagues, Esteve-Volart, 26 October 2009

As women are underrepresented amongst legislators, many governments impose gender quotas on candidate lists. This column examines Spain’s elections and argues that its political parties evade the quota. It claims that parties use female candidates as pawns chosen according to how their presence in the list would affect gender statistics and male candidates’ possibilities of success.

Eijffinger, 24 October 2009

Governments are restructuring their financial supervision systems. This column warns that the proposed new structure for European financial supervision is poorly coordinated and will not help in a systemic crisis. It discusses how the ECB might coordinate macro-prudential supervision in the euro area.

Hufbauer, 23 October 2009

Gary Hufbauer of the Peterson Institute for International Economics talks to Romesh Vaitilingam about potential conflicts between global agreements on tackling climate change and the rules of the international trading system, including possible outcomes from the upcoming Copenhagen climate conference. The interview was recorded in Geneva at the inaugural Thinking Ahead on International Trade conference in September 2009.

Huberman, Meissner, 23 October 2009

Globalisation is often accused of unleashing a race to the bottom in labour regulation and social protection. The evidence suggests otherwise. This column explains how, historically, trade itself was a path to better labour regulation and social entitlements.

Berman, Mayer, Martin, 22 October 2009

The prices of tradable goods are remarkably insensitive to exchange rate movements. This column provides a firm-level explanation. In response to a depreciation, high-performance firms raise their mark-ups rather than their export volumes, and their choices dominate the aggregate export variables.

Gersbach, Hahn, 21 October 2009

This column suggests that there are surprising parallels between inflation targeting and bank capital requirements. It shows they could inform each other.

Jácome HG., 20 October 2009

Latin American central banks seem to have weathered the global crisis quite well. This column describes their policy responses and says they succeeded in lowering inflation, averting banking crises, and shortening the recession. It attributes their success to past reforms that created strong institutional foundations and effective policy frameworks.

Ohanian, 19 October 2009

What started the Great Depression? This column says that the industrial decline began before monetary contraction or banking panics – the conventional culprits – took hold. It attributes the massive drop in manufacturing hours to President Hoover’s labour policies, which kept nominal and real wages high.

Bossone, 17 October 2009

The G20 recently asserted itself as the “the primary forum for our international economic cooperation.” This column questions the efficiency and legitimacy of such governance. It says that the IMF – the only multilateral financial institution with universal representation – is the natural place for international financial policy cooperation.

Cherny, Demyanyk, 17 October 2009

The global crisis is said to have originated in the US subprime mortgage market. This column argues that many of the most popular explanations that have emerged for the subprime crisis are, to a large extent, myths.

Frieden, 16 October 2009

Jeffry Frieden, professor of government at Harvard University, talks to Romesh Vaitilingam about global economic governance – including the world trading system, financial regulation and the G-20 – and their interactions with domestic politics, particularly in the United States. The interview was recorded at the Global Economic Symposium in Schleswig-Holstein in September 2009.

Levy Yeyati, Ghezzi, Broda, 16 October 2009

Many expect the dollar to continue to depreciate over the foreseeable future. This column suggests that it may strengthen in 2010 if the Federal Reserve exits quantitative easing sooner than its counterparts and the US economy enjoys a strong rebound.

Aizenman, Yi, 15 October 2009

Emerging markets accumulated massive international reserves over the last decade. This column explores how they used them to respond to the crisis. Economies that accumulated reserves for trade concerns drew them down in response to the shock, while economies driven by financial factors showed a “fear of depleting”.

Uhlig, 15 October 2009

The recent crisis was like a bank run, but it didn’t quite fit. This column describes six features that a model of the recent crisis ought to capture and describes a new theory with which we might analyse the crisis and policy responses.

Auer, Kraenzlin, 14 October 2009

The world’s major central banks used underpublicised swap agreement to address mismatches in their currency-specific liquidity needs during the crisis. This column says these measures where highly effective and came at a very low cost.

Hesse, Dalla, 13 October 2009

As the financial crisis has curtailed the ability of borrowers in emerging markets to find funds abroad, they have turned to raising capital in domestic markets. Local-currency bond markets had already grown tremendously since the crises of the 1990s. This column says that deepening local-currency bond markets should now be a top priority for emerging economies.

Doepke, Zilibotti, 12 October 2009

Rich-country governments and consumer groups pressure poor countries to discourage child labour through boycotts and international labour standards. Yet child labour continues unabated. This column suggests international activism may be partially to blame, because reducing the use of child labour in the formal sector decreases domestic pressures to prohibit it throughout the economy.

Berger, Stavrev, 10 October 2009

Uncertainty surrounding potential output is keeping policymakers awake around Europe. This column argues that monetary policymakers should clearly communicate their views on potential output and their intent to adjust as new information becomes available in order to keep inflation expectations firmly anchored and limit the costs of policy mistakes. It also says that fiscal policy should be consolidated as soon as the recovery becomes entrenched, as returning fiscal policy to a sustainable path will be a formidable challenge.

Josling, 09 October 2009

Tim Josling of Stanford University talks to Romesh Vaitilingam about emerging challenges for the world trading system around trade in food and agriculture – including price volatility, the emergence of private food standards and the future of farm policies in developed countries. The interview was recorded in Geneva at the inaugural Thinking Ahead on International Trade conference in September 2009.

Blinder, 09 October 2009

Fear of offshoring may force its way back onto policy agendas soon. This column uses a survey of individual workers to measure the offshorability of particular jobs and says that about 25% of US jobs are offshorable. Surprisingly, routine tasks are not more offshorable but those held by more educated workers are.

Etro, 08 October 2009

The European Commission and Microsoft appear to have nearly settled the dispute over bundling Internet Explorer with Windows. This column says it’s very much time to move on. The browser market was already quite competitive, and Microsoft’s offer of a “ballot screen” eliminates even the most theoretical barriers to competition.

Giuliano, Guiso, Butler, 08 October 2009

Virtually every commercial transaction involves trust, and more trusting societies tend to be richer. But does it pay individuals to trust? This column suggests that relationship between trust and income is not always increasing but is instead hump-shaped. Individuals that mistrust too much tend to miss profitable opportunities, while those who are too trusting are cheated abnormally often.

Huizinga, Laeven, 07 October 2009

The financial crisis has reinvigorated a debate on the effectiveness of our accounting and regulatory frameworks. This column shows that banks, hoping to preserve their book capital, use accounting discretion to systematically understate the impairment of their real-estate-related assets. But the accounting reforms announced thus far are exacerbating the gap between book and market values.

Brunello, Michaud, Sanz-de-Galdeano, 06 October 2009

Should the government intervene to reduce obesity on the basis of equity or efficiency? This column gives reasons to be sceptical common arguments for such interventions. Unless health insurance provision creates significant moral hazard problems that encourage obesity, there is little reason to attack obesity on the basis of health insurance externalities.

Székely, van den Noord, 06 October 2009

The European economy is in its deepest recession since the 1930s. This column says that swift policy response avoided a financial meltdown, but turning the ongoing recovery into sustained growth requires action on five challenges: boosting potential output, enhancing labour market flexibility, preparing fiscal consolidation, facilitating intra-EU adjustment, and unwinding global imbalances. Europe also needs an improved crisis-management framework, lest this happen again.

Berglöf, 05 October 2009

Europe’s banking system did not collapse, and the twin-crisis curse – calamity in both banking and currencies – did not appear, but this is no time for resting on laurels. The ERBD’s Chief Economist argues that Europe’s “muddle-through cooperation” on financial institutions (Vienna Initiative) needs continued political support as do reforms of long-run fiscal positions and financial regulation.

Farmer, 05 October 2009

Has the US recession already ended? This column says that it very likely has, based on evidence from the last fourteen recessions. It predicts that the NBER will declare that the recession ended in May 2009. But that doesn't rule out the dangers of a double dip or jobless recovery.

Vayanos, Woolley, 05 October 2009

Have capital market booms and crashes discredited the efficient market hypothesis? This column says yes and suggests a new model that explains asset pricing in terms of a battle between fair value and momentum driven by principal-agent issues. Investment agents’ rational profit seeking gives rise to mispricing and volatility.

Bradlow, 05 October 2009

Historical wrongs have long-lasting consequences. This column says that reconciliation must include a financial component that assists victims of injustice onto sustainable paths to independent lives of dignity and opportunity. It suggests reconciliation bonds.

Miller, 03 October 2009

A bursting economy-wide asset bubble could be the economic equivalent of a collapsing supernova – the “black hole” of mass insolvency threatening to swallow whole sectors of an over-leveraged economy. This column outlines the role for government rescues in response to a vicious deleveraging spiral, though they raise moral hazard concerns.

Chauffour, 03 October 2009

World leaders have violated their repeated pledges to resist protectionist pressures. This column says that fighting protectionism is both an economic imperative and a moral responsibility to make sure that the darkest hours of the 20th century do not repeat themselves.

Suominen, 03 October 2009

The G20 summit in Pittsburgh produced some results, but challenges lie ahead. This column says world leaders need to implement internationally coordinated macroeconomic policy changes even when they may clash with domestic political imperatives, conclude the Doha Round, and harmonise the spree of financial regulatory reforms now in motion around the world.

Rose, Spiegel, 03 October 2009

The 2008 financial crisis is sometimes characterised as one where financial difficulties in the US spread to the rest of the world. But is there clear evidence of such international contagion? This column reports research indicating that neither financial nor trade linkages to the US help explain the cross-country incidence of the crisis. If anything, countries more exposed to the US seem to have fared better.

Williamson, 02 October 2009

Do IMF special drawing rights have a role in international financial reform? This column argues that SDRs should play a large role in providing additional international liquidity, substituting for a substantial share of countries’ reserve currency holdings. It says that SDR allocation offers the surest way of reducing the inconsistency in payments objectives that currently looks to be the biggest obstacle to a strong recovery in the global economy

Weber, 02 October 2009

Axel Weber, President of the Deutsche Bundesbank, talks to Romesh Vaitilingam about the need to rebalance between risk-taking and regulation in financial markets. They discuss the opportunity for central bankers and other G20 players to design and implement new regulation, and the likely future size of the financial sector in the overall economy. The interview was recorded at the Global Economic Symposium in Schleswig-Holstein in September 2009.

Mendoza, Vegh, Ilzetzki, 01 October 2009

How much stimulus does spending provide? This column says that fiscal multipliers are much weaker in countries that have high debt, lower income, flexible exchange rates, and greater international openness. Policymakers should consider these characteristics when evaluating the benefits of any fiscal stimulus package.


CEPR Policy Research