May 2011

Becker, Woessmann, 31 May 2011

For centuries, Europe was ruled by empires wielding global influence. This column shows that these empires can leave behind a long-lasting legacy through cultural norms. Comparing individuals on opposite sides of the long-gone Habsburg Empire border within five countries, it shows that firms and people living in what used to be the empire have higher trust in courts and police.

Manasse, 30 May 2011

How should Greece try to reduce its debt? Some say Greece should privatise some of its ports and tourist hotspots. While on paper such a move might significantly reduce the debt, this column argues that these calculations rely on some shaky assumptions. Such a sale could make Greece worse off overall.

Das, Krishna , Lychagin, Somanathan, 30 May 2011

Since the late 1990s, India has liberalised its economy to an extent unthinkable even 20 years ago. This column looks at the effect that private sector competition can have on the country’s still large public sector. Using plant-level data from the main provider of steel for India’s railways it finds that when the publicly-owned company faced the risk of closure, productivity dramatically increased.

Micossi, 29 May 2011

The Eurozone crisis has exposed serious flaws in the single currency’s ability to manage a crisis. This column outlines three ways that Europe’s financial assistance programmes should be changed to rectify this.

Rose, Wieladek, 29 May 2011

During the global crisis governments made substantial interventions in financial markets, particularly in the banking sector. This column argues that one unintended consequence of bank nationalisations has been to reduce cross-border lending. After nationalisation, foreign banks reduced British lending as a share of total lending by about 11 percentage points and increased interest rates to UK residents by 70 basis points. This suggests foreign nationalised banks have engaged in financial protectionism.

Weekes, 28 May 2011

The Doha Round is stuck. This essay argues that finishing Doha would be best, but if this is impossible, we should admit it and move on. Investing more resources and credibility in a failure would only damage the WTO and multilateral cooperation. Leaders should turn their energies towards building an agenda for the WTO’s future work that responds to 21st century interests. Getting this right is critical; the WTO cannot afford another failure if Doha dies. An early harvest is an excellent idea, but only if it can be done quickly.

Harbinson, 28 May 2011

The core Doha goals – better market access and rules for agricultural, industrial, and services trade – still matter, but Doha is a ship run aground. This essay argues that the choices are: i) to abandon ship and try with a new ship later, or ii) to patch up the holes by delivering some progress in December 2011 and then wait for a high tide to carry us off the rocks. Only the latter is likely to achieve the core goals.

Sun, 28 May 2011

Doha is deadlocked. This essay argues that the options are: i) to declare the negotiations dead, ii) to suspend them until after the US elections, or iii) to negotiate an early-harvest agreement for the end of this year. The author strongly believes that the early harvest is worth the extra efforts – for both the WTO and the world’s poorest.

Bhatia, 28 May 2011

Hopes for finishing Doha in 2011 are fading fast. This essay suggests a three-track approach for moving beyond the Doha crisis. 1) Identify a package of “deliverables’ – parts of the Round that could be agreed by December 2011. 2) Assemble a package of contentious issues for ongoing negotiation with clear terms of reference. 3) Establish a work programme to consider WTO institutional reform and forward-looking issues.

Baldwin, Evenett, 28 May 2011

After 10 years of much progress and much frustration with the Doha Round, it is time to find a new approach to bring the negotiations to a successful conclusion. This essay argues that success would require four things implemented simultaneously: i) a Doha down-payment package agreed this year, ii) an understanding of how to reorganise continuing talks on the most contentious issues, iii) commencement of a WTO work programme on 21st-century trade issues, and iv) a bold initiative by middle power WTO members to try to unblock the talks.

Baldwin, Evenett, 28 May 2011

World leaders must make important decisions concerning the future of the Doha Round for the 31 May 2011 meeting of the WTO membership. This essay introduces the issues and summarises contributors’ suggestions for “Next Steps”. It argues that the best outcome would be for WTO members to agree to work towards a small package of deliverables for December 2011 and push the rest of the agenda items into the future – perhaps with specific instructions for changing the basic negotiating protocols used to date.

Schwab, 28 May 2011

The Doha Round has failed, according the former US Trade Representative Susan Schwab. This essay argues that prolonging Doha jeopardises the multilateral trading system and threatens future prospects for WTO-led liberalisation. Negotiators should salvage whatever partial agreements they can from Doha, and quickly drop the rest to ensure the December ministerial meeting focuses on future work plans rather than recriminations over Doha.

Baldwin, Evenett, 28 May 2011

The Doha Round poses a dilemma for world leaders; the talks cannot be completed this year, but there is no agreement among WTO members on either suspending or killing the Round. This column introduces the latest VoxEU eBook, which gathers the thoughts of some of the world’s most experienced trade negotiators on what comes next. Indonesia's trade minister and former WTO Ambassadors from the US, China, India, Canada and Hong Kong each provide a plan for getting past the Doha crisis.

Pangestu, 28 May 2011

Doha is stalled by gaps that are unbridgeable today. Indonesia’s Trade Minister argues that we need to be guided by priorities and pragmatism. We should develop a set of stepping stones that will help us complete the Doha Round eventually. We should identify the areas that are achievable in the very near future but which have an impact on development while building confidence for the continued journey to a successful Round. We should never lose sight of the final goal – completing the Doha Round as a single undertaking. In short, we are not looking for a “Plan B”; we are looking for a new way to execute Plan A.

Josling, 28 May 2011

Concluding the Doha Round of trade negotiations this year appears to be impossible, according to most commentators. This column argues, however, that there are still some things to be salvaged, particularly regarding agricultural trade.

Prat, Bandiera, Guiso, Sadun, 28 May 2011

What do CEOs get up to all day? Most accounts are based on surprisingly small samples. A new study of how CEOs allocate their time yields some surprising results.

Sutherland, 27 May 2011

Peter Sutherland talks to Viv Davies about the final report of the high-level trade experts group, published this week, on 'World Trade and the Doha Round'. The report traces the imminent failure of the Doha Round back to what the authors consider to be "a deficit of political leadership"; they also make the case for why the WTO matters. The interview was recorded in London on 24 May 2011. [Also read the transcript.]

Fahlenbrach, Prilmeier, Stulz, 27 May 2011

Crises are a regular event in financial markets. But do banks that have been hit particularly hard in one crisis learn from the experience and suffer less in future crises? This column suggests not. It shows that banks particularly hard hit by the 1998 financial crisis were also badly affected by the recent financial crisis. It blames the high-risk business models on which these banks rely.

La Ferrara, Alesina, 27 May 2011

Southern US states have long been accused of discrimination against racial minorities – particularly blacks and Hispanics. This column looks for racial bias in criminal murder trials. It finds that a murder by an ethnic minority criminal against a white victim systematically receives harsher punishment than if the murder had been committed by a white criminal.

Bordo, Rousseau, 26 May 2011

How interconnected are finance, trade, and economic growth? This column looks to the past in search of an answer. Examining economies that traded across the Atlantic, it finds that finance and trade reinforced one another between 1880 and 1914 but these links were absent in the post-war period. Financial development has been strongly related to growth throughout the last 130 years, whereas trade had a direct effect on growth only after 1945.

Albertazzi, Gambacorta, Salleo, 25 May 2011

Before the global crisis, securitisation was hailed as a major breakthrough for the safe functioning of financial markets. Now it is suffering from seriously bad public relations. This column presents evidence from 50 Italian banks between 1995 and 2006 and argues that securitisation, by itself, does not deserve such a nasty reputation.

Manasse, 24 May 2011

For a long time analysts have been arguing about whether Greece will default on part of its debt – leaving its creditors to take a “haircut”. This column argues that this prospect is becoming more and more likely.

Spatafora, Berg, 24 May 2011

What effect did the global financial crisis have on low-income countries? This column examines data from the last forty years to help place 2007–2009 in perspective. It finds that the global crisis was largely transmitted to low-income countries through external demand shocks that were not tremendously large relative to historical volatility. Such demand shocks are usually bad for growth in the short to medium run, but they may not have damaged poor economies' long-run growth prospects.

Gros, 24 May 2011

As EU leaders muddle through the Eurozone crisis, the debate about its root causes continues. The debate is important if we are to understand how to prevent future crises. This column argues that the focus on total public debt is misleading – external debt is the key to the turmoil in European economies.

Angelini, Neri, Panetta, 23 May 2011

The global financial crisis has prompted an intense debate on the role of macroprudential policies in limiting the accumulation of risks and imbalances. Major economies have recently established new institutions, or strengthened existing ones, with a mandate to pursue financial stability. This column examines the effectiveness and consequences of macroprudential policies with a focus on their interaction with monetary policy.

Véron, 23 May 2011

The quip that “cross-border banks are international in life, but national in death” resonates loudly amongst the empty shells of international banks that have since been bailed out by their home countries. This column argues that such tensions will intensify in the coming years.

Baldwin, 23 May 2011

How will global trade governance evolve in the 21st century? This column introduces a new CEPR Policy Insight arguing that 1) trade today is radically more complex than last century 2) 21st century trade demands are currently being met by “21st century regionalism”, not the WTO, and 3) this regionalism has quite different implications for world trade than the traditional thinking suggests.

Voigtländer, Voth, 22 May 2011

Is violence a cultural trait passed from one generation to the next? This column examines an extreme case – anti-Semitism in Germany. It shows that towns that murdered their Jews during the Black Death (1348-1350) were also much more likely to commit violence or engage in anti-Semitic acts in interwar Germany, nearly 600 years later. This suggests racial hatred can persist over centuries.

Murphy, 22 May 2011

Working 9 to 5, Monday to Friday is the typical grind in Anglo-Saxon economies. In some professions, longer hours and low pay for junior workers is justified by the end reward of much better pay and a better work-life balance as they gain seniority. This column examines the workings of the Bank of England in 1783 to show the beginnings of this working culture.

Tsui, 21 May 2011

It has been widely argued that natural-resource wealth is a curse that leads to corrupt politicians, closed and illiberal societies, and defunct economies. This column presents new evidence on the political impacts of oil wealth. It argues that the effects depend on geology and history, shedding light on the recent uprisings in the Middle East and North Africa.

Mattoo, Ng, Subramanian, 21 May 2011

With the Doha Round on the brink of failure, the blame game is moving into high gear. This column argues that the political perception of China’s export competitiveness and its exchange-rate policy are a real problem. In effect, the whole basis for exchanging trade policy concessions is being undermined because a de facto trade policy instrument – the exchange rate – is seen as nullifying these concessions while remaining beyond the scope of multilateral negotiations and discipline.

Baglioni, 21 May 2011

Should Greece's creditors tackle its mountain of debt by writing some of it off or stretching out the repayment period? This column argues that both approaches are likely to have profound negative repercussions for Greece and the rest of Europe. Instead, it suggests a “market-based solution.”

Rana, 20 May 2011

Macroeconomic cooperation in Asia has taken huge strides forward over the last 18 months, including the Chiang Mai Initiative and the more recent establishment of the ASEAN+3 Macroeconomic Research Office. But this column argues that while the road towards an Asian Monetary Fund is now shorter, we shouldn’t expect to see a new fund for at least another five years.

Lacetera, Pope, Sydnor, 20 May 2011

People like to take shortcuts and this affects how we make decisions. Looking at auctions of more than 22 million used cars in the US, this column finds that buyers will often only pay attention to the first few digits of mileage. So if you have driven your car 30,000 miles, you might have to sell it for $200 less than if you had driven in 29,999 miles.

Brückner, 20 May 2011

Foreign aid has a significant positive effect on real per capita GDP growth in the least developed countries if account is taken of the quantitatively large and negative reverse effect of GDP growth on foreign aid. That is the conclusion of research by Markus Brückner of the University of Adelaide, which he discussed with Romesh Vaitilingam in an interview recorded at the annual congress of the European Economic Association in Glasgow in August 2010. [Also read the transcript.]

Anderson, Yotov, 19 May 2011

Free trade agreements are controversial. While they promote trade between the member countries, they may also divert trade away from non-member countries, potentially reducing welfare. This column provides evidence that, even when trade diversion is taken into account, the overall effects are still strongly positive.

Bergsten, 18 May 2011

US trade policy is moving again as major decisions are being made this month on both bilateral FTAs and multilateral negotiations at the WTO known as the Doha Round. This column argues a conclusion of the Doha Round would be useful but notes that if Doha comes off the rail, the US has other options. In particular, the bilateral FTAs and the Trans-Pacific Partnership talks with Asia-Pacific nations. These non-WTO agreements enjoy very strong US constituencies whereas Doha enjoys very few.

de la Dehesa, 18 May 2011

Europe’s sovereign debt crisis is a defining moment for the Eurozone. This Vox column argues that the crisis exposes weaknesses in the monetary union’s design, governance, and management – many of which were pointed out long before the euro existed. But, despite this, it adds that the Eurozone still has the ability to make good.

Ma, Assche, 18 May 2011

Why do firms offshore manufacturing to China? This column uses data from China’s processing trade regime to argue that a hidden driver is the country’s geographic proximity to its East Asian neighbours.

Keeling, 17 May 2011

Mass international migration is inherently controversial. This column looks at how the US immigration policies before 1914 sought to manage mass migration across the North Atlantic. It suggests that, with migration today seemingly neither well-controlled nor well-managed, the managed laissez-faire approach of a century ago is regaining relevance.

Baldwin, 17 May 2011

Most observers in Geneva expect the Doha round to fail. If that happens, this column argues that the prospects for US market-access policy will be grim. New multilateral tariff cutting is unlikely before 2020 and special interest groups in the US will hold back free trade agreements, leaving the country to fall behind in the bilateral market-access game.

Frankel, 16 May 2011

It is a year since Greece was bailed out by EU and IMF and there are many who label it a failure. This column says that while there is plenty of blame to go around, there were three big mistakes made by the European Central Bank. Number one: Letting Greece join the euro in the first place.

Baldwin, 16 May 2011

Two decades of spectacular growth and industrialisation in emerging economies has transformed the world economy, presenting US trade policy with new challenges. This is the first of two columns that consider one aspect of the new challenges – the ways in which the Obama Administration can secure better access for American exporters.

Cabral, 15 May 2011

Greece, Ireland, and more recently Portugal have applied for EU and IMF financial aid. This column argues the accompanying adjustment programmes should be modified to reflect the balance of payments and external debt crises these countries face. It suggests that these countries’ public and private debt should be restructured and their tax structure should be rebalanced to replicate the effect of currency devaluation and so improve these countries’ external competitiveness.

Breyer, Felder, Costa-i-Font, 14 May 2011

Over the last half century, life expectancy in the industrialised world has risen dramatically – and so has the healthcare bill. Is population ageing the main reason? This column argues that while ageing does affect health spending, it is far less important than many think. It adds that obsession with an ageing population is a dangerous red herring that prevents dealing with the real culprits of rising costs.

Acharya, Richardson, 13 May 2011

Viral Acharya and Matthew Richardson of New York University talk to Viv Davies about their book ‘Guaranteed to Fail: Fannie Mae, Freddie Mac and the Debacle of Mortgage Finance’. The financial collapse of these government sponsored enterprises led to a government intervention that has already cost US taxpayers around $150 billion. The authors discuss how these institutions collapsed, why housing finance in the US is broken and what now needs to be done to reform the system. The interview was recorded in London in May 2011. [Also read the transcript.]

Goodhart, Persaud, 13 May 2011

The UK’s Independent Commission on Banking was set up last year to consider reforms to promote financial stability and competition. This column reacts to the commission’s interim report released on 11 May 2011. It argues that the commissioners have a lot to ponder before the final report is due in September – they have not gone far enough.

Acharya, Richardson , Van Nieuwerburgh, White, 12 May 2011

At the centre of the global financial crisis was a housing boom and bust. This column continues the description of how flaws in the US housing finance sector made the crisis inevitable. Here the authors outline a reform plan to avoid this outcome and contrast it to the US Treasury proposals.

Aiyar, 12 May 2011

It is widely believed that banks played a central role in the Great Recession, but where is the smoking gun? This column presents evidence from the UK confirming the conventional wisdom. It finds that banks transmitted the unprecedented external funding shock by cutting back on domestic lending.

Acharya, Richardson , Van Nieuwerburgh, White, 11 May 2011

At the centre of the global financial crisis was a housing boom and bust. A New York University team has produced an excellent book on the flaws in the design of US housing finance that opened the door for the mayhem that followed. This column, the first of a series of two, describes the race to the bottom that occurred among Fannie Mae, Freddie Mac, and the too-big-to-fail private financial institutions.

Bhatia, 11 May 2011

Is the Doha Round dead? This column argues that it is perilously close and that the biggest reason for this is one large member, i.e. the US. But it adds that emerging economies could do more to save the trade discussions.

Liu, Ornelas, 11 May 2011

The economic effects of free trade agreements are widely studied, but what about their political impact? Using data from over 125 countries over the past 60 years, this column argues that by removing protectionism, free trade can lower the government’s power and hence the incentives of autocrats to hold office. All this can help strengthen democracy.

Bhatia, 10 May 2011

Multilateral trade talks known as the Doha Round are on the edge of a failure that would have unpredictable but potentially dire consequences for global cooperation. This column – written by India’s ex-WTO Ambassador – suggests a way out of the crisis. World leaders should turn their attention to salvaging Doha by segregating the most contentious issues for continuing consultation, finalising stand-alone agreements in the less contentious areas, and initiating a work programme on WTO institutional reform.

Longstaff, Ang, 10 May 2011

Why is the risk of default by Eurozone countries much higher than for US states? After all, both Europe and the US have experienced defaults over the past century. This column presents evidence suggesting that systemic risk is not caused by close macro integration but rather by the strength of their financial markets.

De Grauwe, 10 May 2011

Why does the Spanish government pay significantly more to borrow than the UK government – despite having a smaller deficit and lower overall debt? This column argues that the reason lies in the Eurozone’s fragility. Its members lose their ability to issue debt in a currency over which they have full control. The column discusses ways to deal with this weakness.

Dadush, Stancil, 09 May 2011

Between 2000 and 2009, developing countries added almost $5 trillion to their foreign-exchange reserves – a number deemed too high by many, prompting accusations of protectionism. But this column argues that developed countries are equally to blame – as well as failures in international coordination. It concludes that remedies therefore require action by both groups.

Drysdale, 07 May 2011

Discussions on breaking the impasse between the US and China are continuing following last month’s landmark meeting of WTO members. This column – written by the intellectual father of APEC – argues that allowing Doha to languish for years is deeply dangerous. Part of an eBook posted in April, the column asserts that failure to conclude Doha this year would put a dagger at the heart of the multilateral system. With the rise of China, the decline of US trade leadership, turmoil in the Middle East, and a damaged and imbalanced global economy, the world needs multilateralism more than ever.

Zamil, 07 May 2011

How much capital should banks hold to cover their risk? This column argues that the preoccupation with capital rules misses a more fundamental concern. No amount of feasible regulatory capital can be an appropriate substitute for robust asset selection and valuation standards of banks.

Kocher, 06 May 2011

Is young people’s economic behaviour different from that of adults? Martin Kocher of the University of Munich talks to Romesh Vaitilingam about his experimental research with children and adolescents aged 8 to 18 – and the implications for policy debates around smoking, drinking, drugs, obesity and other health and education issues. The interview was recorded at the annual congress of the European Economic Association in Glasgow in August 2010. [Also read the transcript.]

Surico, Misra, 06 May 2011

What are the macroeconomic effects of a tax rebate? This column takes a novel approach by estimating the effects on a range of different individuals rather than just the typical person. Looking at the 2001 income tax rebates in the US, it finds evidence of a heterogeneous response to tax cuts and an economic effect $9 billion below what linear models suggest.

di Mauro, Mandel, 05 May 2011

Has the global crisis changed international trade forever? This column presents a Q&A on global trade taken from a new eBook from the European Central Bank: “Recovery and Beyond”.

Ghani, Grover Goswami, Kharas, 04 May 2011

Services have long been the main source of growth in rich countries. This column argues that services are now the main source of growth in poor countries as well. It presents evidence that services may provide the easiest and fastest route out of poverty for many poor countries.

Oh, Reis, 04 May 2011

Government spending and its effect on the economy is a perpetual source of debate. This column argues that too much discussion has focused on government purchases, when the fiscal expansion from 2007 to 2009 was all about transfers. It suggests that fiscal spending on transfers can boost the economy in a recession, though only if the transfer moves resources between the right groups.

Mees, 03 May 2011

The latest figures from the US show that the consumer price index rose 0.5% in March, whilst the core personal consumption expenditure price index rose only 0.1%. This column explains the roles of these competing measures and argues that US monetary policymakers should pay close attention to headline inflation. It warns that neglecting headline inflation risks feverish boom-and-bust cycles with prolonged periods of high unemployment.

Hatton, 02 May 2011

The recent surge of refugees entering Europe from North Africa – particularly through Lampedusa – has caused a rift among EU states over what should be done and who should shoulder the responsibility. This column asks what theory and recent history can tell us about sharing the refugee burden in the EU.

Dutt, Mihov, Van Zandt, 01 May 2011

The WTO ‘dodged the bullet’ last week when members agreed to continue working on the deadlock holding up the Doha Round of multilateral trade negotiations. This column surveys the existing econometric evidence on the trade effect of WTO membership. It also presents new evidence that membership raises the range of goods that members export – increasing it by an estimated 42%. The authors conjecture that the WTO boosts trade by reducing uncertainty in the mind of potential exporters regarding the evolution of international trade rules.


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