February 2019

Boz, Li, Zhang, 28 February 2019

It is commonly observed that economies specialising in sectors, such as services, that face relatively high trade costs tend to run current account deficits, while those specialising in more easily tradable sectors tend to run surpluses. This column tests the causality of this observation by constructing a measure of effective trade costs. Results show that although higher effective exporting costs are associated with lower current account balances, the impact of those costs is quantitatively limited. The findings suggest that the contribution of trade costs to observed global imbalances has been modest.

Altavilla, Lemke, Motto, Valla, 28 February 2019

The ECB Conference on Monetary Policy took place in Frankfurt from 29 to 30 October 2018. This column describes presentations on topics including the interaction of monetary policy and financial markets, the relevance of banks and credit flows for monetary policy transmission, and the current challenges for monetary policy frameworks and strategies. The conference provided a forum for academic research and the practice of central banking to meet. 

Gelos, Grinberg, Khan, Mancini-Griffoli, Narita, Rawat, 28 February 2019

There is little evidence on whether deteriorating household balance sheets in advanced economies have made monetary policy less effective since the Global Crisis. Using US household-level data, this column shows that the responsiveness of household consumption to monetary policy has in fact diminished since the crisis, and that households with the highest indebtedness responded the most to monetary policy shocks. Since the distribution of debt did not change after the crisis, this suggests that household debt did not contribute to lessening the effects of monetary policy over time. 

Furceri, Ahmed Hannan, Ostry, Rose, 27 February 2019

It seems an appropriate time to study what, if any, have been the macroeconomic consequences of tariffs in practice. Using a straightforward methodology to estimate flexible impulse response functions, and data that span several decades and 151 countries, this column finds that tariff increases have, on average, engendered adverse macroeconomic and distributional consequences: a fall in output and labour productivity, higher unemployment, higher inequality, and negligible effects on the trade balance (likely owing to real exchange rate appreciation when tariffs rise). The aversion of the economics profession to the deadweight loss caused by protectionism seems warranted.

Bughin, 26 February 2019

The US and China are clear leaders in investment in, and the adoption of, artificial intelligence. This column argues that while Europe lags in these areas, it is home to high levels of developer talent and to significant AI hubs. European AI may thrive if its human capital and innovation culture are combined with levels of investment seen elsewhere.

Bianchi, Comin, Kung, Kind, 26 February 2019

During the Great Recession, several European countries implemented fiscal austerity measures to reduce sovereign debt. This column argues that such policies affect the decision to adopt new technologies and can have negative consequences for productivity and growth in the medium run. Thus, low technology adoption due to fiscal austerity can lead to slow recoveries. These, in turn, can make the fiscal stabilisation unnecessarily costly. Fiscal austerity is desirable only if it is able to reduce the cost of financing debt quickly.

Badarinza, Balasubramaniam, Ramadorai, 26 February 2019

Over the past few decades there has been great interest in taking formal finance to households around the world, especially in emerging economies. Using micro-level data from six emerging economies – China, India, Bangladesh, the Philippines, Thailand, and South Africa – this column creates harmonised measures of household assets and liabilities. The findings suggest that there is still much work to be done to truly financialise household balance sheets. There are many differences between the management of wealth between emerging economy and advanced economy households that we do not yet understand. 

Editors, 26 February 2019

Philip Lane, a CEPR Research Fellow, will soon become the ECB's chief economist. Read this selection of his columns to find out his opinions on the euro area, financial stability, and monetary policy.

Dessein, Prat, 25 February 2019

A growing body of empirical work documents how management is a key production factor, both in terms of management practices and managerial talent. This column distinguishes three disparate theories, proposing a new framework that reconciles the insight of each. Contingency theory holds that firms always make optimal decisions, while the organisation-centric and leader-centric approaches hold that firms adopt better management practices, or hire better CEOS, respectively, for unmodeled reasons. The new framework integrates leadership quality and organisational capital, and generates new testable hypotheses.

Egger, Erhardt, Keuschnigg, 25 February 2019

The effect of taxes on firm-level investments is very heterogeneous. This column shows that the impact of corporate taxation is up to 70% higher for entrepreneurial firms than for managerial ones, while dividend taxation negatively affects the investment of financially constrained firms but entails no significant impact on cash-rich firms. Policy should provide targeted tax relief to the most constrained firms, where taxes are most harmful, if other policies are unsuccessful in improving access to external funds.

Coeuré, 25 February 2019

There is a growing debate in Europe as to whether recent shifts in global governance should be seen as a reason to strengthen the global role of the euro. This column explains that while the ECB does not take a view on foreign policy questions, the alignment between policies that will strengthen the euro’s global role and policies that are needed to make the euro area more robust, together with the implications for monetary policy that a stronger international role of the euro would have, make the debate relevant to the central bank.

Moriconi, Peri, Pozzoli, 24 February 2019

Firms’ offshoring decisions depend on the size of entry costs in target countries. But the institutional and policy determinants of these costs have received little empirical attention. This column uses data on 2,000 Danish manufacturing firms to explore how costs of entry affect offshoring decisions. Higher levels of labour market rigidity, credit risk, and corruption all lower the probability of offshoring to a given country, while immigrant networks within the firm increase the likelihood of offshoring to their home countries. 

Cummins, 24 February 2019

Within countries, the driving force behind the 20th century’s dramatic drop in inequality were the declines in the wealth shares of the top 1%. Based on 60 million death and probate records covering a period of 100 years, this column argues that in the case of Britain the distributional gains from the Great Equalisation were exclusively confined to the top 30% of the wealth distribution. This left the nation’s social and political fabric vulnerable to the protest vote of many in 2016 to leave the EU, following the austerity induced by the financial crisis.

Székely, Ward-Warmedinger, 23 February 2019

While there is a large literature on the political economy of reforms, surprisingly little is known about reform reversal. Based on an investigation of reform reversals in former transition countries, this column argues that once reforms are introduced, self-enforcing social norms and social learning should catch up with the new reality to create domestic anchors. Social norms have not always been strong enough to outweigh the opportunistic behaviour of politicians seeking short-term windfall gains. External anchors, while helping to protect reforms, cannot replace domestic ones.  

Giuliano, 22 February 2019

Why do girls do less well than boys in school math tests? Paola Giuliano of UCLA explains to Tim Phillips that, for many girls, the problem starts at home.

Schmeling, Wagner, 22 February 2019

According to Ben Bernanke, “monetary policy is 98% talk and 2% action”.Using data on policy rate announcements and press conferences by the ECB between 1999 and 2017, this column shows that central bank tone affects asset prices, even after controlling for policy actions and economic fundamentals. The results are consistent with the idea that communication tone is a monetary policy tool that allows central banks to affect the risk appetite of market participants and the risk premia they require.

Ahlfeldt, Pietrostefani, 22 February 2019

Most countries pursue policies that implicitly or explicitly aim at promoting ‘compact urban form’, but so far these policies have not been well-grounded in evidence. This column summarises the state of knowledge on the economic effects of density on various economic outcomes. It concludes that densification policies may lead to aggregate welfare gains, but there may be regressive distributional consequences.

Coibion, Gorodnichenko, Weber, 22 February 2019

Monetary policy increasingly relies on communication, but most households are unaware of inflation targets or monetary policy announcements. This column uses large-scale randomised controlled trial of US households to study how different forms of communication influence the inflation expectations of individuals. Reading the Federal Open Market Committee statement has about the same average effect on expectations as being told about the Federal Reserve’s inflation target. Reading a news article about the same statement cuts the effect by half. 

Guzman, Ocampo, Stiglitz, 21 February 2019

The role of exchange rate policies in economic development is still largely debated. This column argues that there are theoretical foundations for policies that guarantee competitive and stable real exchange rates. When there are constraints on the available set of policy instruments, the complementary use of competitive exchange rates with export taxes for traditional export sectors would result in effectively multiple real exchange rates. The empirical evidence suggests that both foreign exchange interventions and capital account regulations can be effectively used for maintaining competitive exchange rates and for dampening the effects of boom-bust cycles in external financing and the terms of trade on the exchange rate, thereby promoting growth and stability.

Marongiu Buonaiuti, Vergara Caffarelli, 20 February 2019

The border between the Republic of Ireland and Northern Ireland has become a central issue in the Brexit negotiations between the UK and the EU. This column examines the proposals put forward by the two negotiating parties, and suggests two remedies that could make the European Commission’s initial ‘backstop’ proposal, whereby Northern Ireland would remain in the European Customs Union while the rest of the UK would be excluded from it, acceptable to the UK.  

Lowe, Papageorgiou, Pérez Sebastián, 20 February 2019

Capital doesn’t flow to developing countries as much as economic theory suggests it should, and this might imply that capital is misallocated across nations. This column argues that once public capital is removed from the equation, the evidence shows that private capital is allocated remarkably efficiently across nations. It also suggests that the inefficiencies related to the allocation of public capital across countries can be significant and much larger than those related to private capital. 

Dippel, Heblich, 19 February 2019

The importance of leadership in effecting social change is well recorded in history, but the specific role leaders play in coordinating behaviours is less understood. This column uses the case of the Forty-Eighters – revolutionaries expelled from German lands who moved to the US before the American Civil War – to analyse the impact individuals with ‘inherent’ leadership ability have in their networks. The Forty-Eighters went on to play a substantial role in increasing Union Army enlistments in their new home towns, suggesting individuals can have a powerful effect in shaping social norms.

Buti, Jollès, Salto, 19 February 2019

The launch of the Economic and Monetary Union in 1999 was a considerable challenge and a historic milestone. The first decade of its existence firmly established the euro as a credible construction. As this column describes, however, from 2008 onwards the economic and financial crisis in Europe laid bare the weaknesses of its initial construct. Some assumptions behind the EMU institutional setting had to be reconsidered and, in the following years, considerable efforts were made to strengthen the EMU. To complete the job, we need to rebuild trust and overcome the creditors/debtors divide. 

Lydon, Mathä, Millard, 19 February 2019

Short-time work schemes are a fiscal stabiliser in Europe. Between 2010 and 2013, they were used by 7% of firms, employing 9% of workers in the region. This column uses ECB data to show that firms use the schemes to offset negative shocks and retain high-productivity workers. High firing costs and wage rigidity increase the use of short-time work, which in turn reduces the fall in employment brought on by a recession. 

Kashyap, Kovrijnykh, Li, Pavlova, 18 February 2019

A well-known puzzle in economics is that when stocks are added to the S&P 500 index, their prices rise. Using a theoretical framework and empirical evidence, this column shows that this ‘benchmark inclusion subsidy’ arises because asset managers have incentives to hold some of the equity of firms in the benchmark regardless of the risk characteristics of these firms. As a result, asset managers effectively subsidise investments by benchmark firms. As the asset management industry continues to grow, the benchmark inclusion subsidy will only get bigger. 

Feigenbaum, Muller, Wrigley-Field, 18 February 2019

The mortality rate of non-Hispanic white Americans in midlife has been rising since the beginning of the 21st century, in contrast to the national decline in deaths from infectious disease witnessed during the previous century. This column reviews the fall in infectious mortality in US cities across regions and racial groups. It finds that southern cities had the highest rate of death from infectious disease in every year from 1900 to 1948, primarily because southern cities were populated by greater proportions of black residents, who suffered extreme risks from infectious disease in cities in all regions. 

Miranda, Zolas, 18 February 2019

Private households have often been disregarded as sources of invention and innovation, but evidence has begun to emerge of this sector’s importance. This column examines data from the US Patent and Trademark Office and the US Census Bureau to describe patented household innovations and characteristics of US household inventors, who are predominantly male, white, and US-born. It estimates that in between 2000 and 2011, patented household innovations generated a revenue flow of $1.7 billion, and calls for further efforts to understand the economic role of household innovations.

Balasubramanian, 17 February 2019

There has been considerable criticism of the general reliance on GDP as an indicator of growth and development. One strand of criticism focuses on the inability of GDP to capture the subjective well-being or happiness of a populace. This column examines new growth models, paying particular attention to Bhutan, which has pursued gross national happiness, rather than GDP, since the 1970s. It finds evidence of the Easterlin paradox in Bhutan, and draws out lessons for macroeconomic growth models. 

Aguiar, Waldfogel, 16 February 2019

Streaming platforms give a diverse range of music creators direct access to large audiences, but whether their songs reach these audiences can depend on the platforms’ decisions about what to promote. This column examines the impact of inclusion on Spotify playlists. The overall effect of appearing on the Spotify-curated Today's Top Hits playlist is about 19.4 million streams on average. Inclusion in top selling or new music playlists also has a significant impact on song success. The results suggest that growing concentration in the streaming market, as well as other markets dominated by one or a few players, may create a need for scrutiny of how platforms exercise their power.

Corsetti, Eichengreen, Hale, Tallman, 15 February 2019

Why was recovery from the euro area crisis delayed for a decade? The explanation lies in the absence of credible and timely policies to backstop financial intermediaries and sovereign debt and to thereby prevent problems in banks and bond markets from feeding on one another. This column adds light and colour to this analysis, contrasting recent experience with the 1992-3 crisis in the European Monetary System, when national central banks and treasuries more successfully provided this backstop.

Esteves, 15 February 2019

A new data set compiles the history of international finance spanning a century and a half, revealing new information about globalisation, crises and capital flows. Rui Esteves of the Graduate Institute, Geneva, tells Tim Phillips what lessons it offers for policymakers today.

Akinci, Beck, Donati, Goldberg, Stracca, 15 February 2019

While some improvements have occurred in the wake of the Global Crisis, the international monetary system still is rife with puzzles and challenges. This column summarises the latest Global Research Forum, which took stock of global financial stability a full decade on from Lehman. The starting points for many discussions were that international financial linkages remain strong, but have evolved in their composition; the US dollar continues to be the key currency for international trade and financial transactions; and banking systems have increased their resiliency and broadened their toolkits for dealing with stresses. Meanwhile, corporate debt issuance has soared and average US dollar-denominated liabilities have increased in most major emerging market economies.

Franzoni, Sauermann, Shafi, 14 February 2019

Digital crowdfunding platforms that raise money directly from citizens have created an alternative source of research funding. This column analyses data from the largest science crowdfunding platform, Experiment.com. It finds that women and young researchers are particularly successful in attracting funding in this way, and that risky projects are not disadvantaged as they are with traditional granting agencies. However, the amounts currently raised through crowdfunding are small, so for now it is only a complementary source of funding for most traditional research projects.

Brutscher, Ravillard, 14 February 2019

Promoting investment in energy efficiency has become increasingly important over the past decade, but not much is known about effective ways to promote firm-level investments in energy efficiency. Using new experimental data on EU firms’ stated willingness to invest in hypothetical energy-efficiency projects with varying offers of financing and technical assistance, this column demonstrates how a favourable financing offer can increase the likelihood that firms are willing to invest in energy efficiency by as much as 33%. 

Basso, D'Amuri, Peri, 13 February 2019

The response of labour supply to negative shocks is different across regions due to varying levels of labour mobility. This column shows that the elasticity of labour supply in response to economic shocks is lower in the euro area than in the US, suggesting that a lack of labour mobility may be an obstacle to labour market adjustments in the euro area. Policies aimed at reducing the complexities of migrating for jobs could help ease this mobility gap.

Corsetti, Erce, Uy, 13 February 2019

During the euro area crisis, management of official loan maturities emerged as a critical item in the discussion on which instruments and strategies are most effective at ensuring debt sustainability. Using a theoretical model calibrated to Portugal and cross-country data, this column shows that lengthening loan maturities and managing debt repayment flows has substantial effects on sustainability. It also unveils a key policy trade-off in official lending between increasing the amount of safe debt (immune from rollover risk) and strengthening the incentive to default in response to negative shocks to fundamentals.

Arata, 13 February 2019

The complex networks formed through customer–supplier relationships between firms have the potential to propagate shocks across the economy. This column explores how bankruptcy is propagated through a network of approximately one million Japanese firms. Bankruptcy propagation is observed empirically, but only very infrequently and with very limited reach. This is because the increased connectivity between firms disperses bankruptcy shocks such that they immediately die out. 

Calomiris, Jaremski, Wheelock, 12 February 2019

Banks have direct contractual exposures to one another through a variety of channels, and regulators are concerned about the systemic risk that may result from this. This column examines the Great Depression in the US and describes how important contractual contagion occurred during the Depression which significantly worsened the failure risk of banks by increasing liquidity risk. The findings call for regulatory policies that take account of potential contractual contagion, and that require minimum prudential capital and liquidity buffers to take liquidity risks into account.

Breinlich, Leromain, Novy, Sampson, 12 February 2019

Media reports suggest that some UK firms have started to move production abroad in anticipation of Brexit. Using data on announcements of new foreign investment transactions, this column reports evidence that the Brexit vote has led to a 12% increase in the number of new investments made by UK firms in EU27 countries. At the same time, new investments in the UK from the EU27 have declined by 11%. The results are consistent with the idea that UK firms are offshoring production to the EU27 because they expect Brexit to increase barriers to trade and migration, making the UK a less attractive place to invest and create jobs. 

Aizenman, 12 February 2019

The fall in valuation of Bitcoin has led to a debate over whether decentralised currencies can be reliably stable. This column argues that in contrast to the success of inflation-targeting regimes, there is no feasible path towards stability of a decentralised currency. The instability of cryptocurrencies is the outcome of a systemic 'tragedy of the commons' coordination failure. This is inherent in their design.

Baten, de Pleijt, 11 February 2019

Empirical evidence suggests a positive relationship between gender equality and long-term economic growth, but establishing the direction of causality has been hampered by a lack of consistent data. This column uses historical evidence on dairy farming to examine the growth effects of gender equality. Countries with greater female autonomy allowed women to contribute more to human capital formation and prosperity, leading to greater economic development in the long run.

di Mauro, Lopez-Garcia, Colombo, 11 February 2019

There is growing demand from academia and policymakers for cross-country comparable firm data. CompNet aims to provide such data and to improve understanding of the drivers of competitiveness. Among the findings in the latest cross-country report are that healthy firms are more likely to be credit constrained in the presence of a high share of distressed firms; that the disconnection between real wages and productivity growth in the post-crisis period has been rather heterogeneous across EU firms; and that exporting firms are more productive, larger, pay higher wages, and employ more qualified personnel.

Helble, Le, Long, 10 February 2019

The sudden rise in trade between China and the US – known as the ‘China shock’ – has been the subject of numerous studies, but the even more dramatic increase in trade between China and developing countries in Asia has been somewhat overlooked. This column studies the impact of the China shock on income inequality in Vietnam. It suggests that increased trade with China reduced income inequality. It resulted in income growth for the lowest income quantiles while higher income groups saw their income decline.

Catillon, Cutler, Getzen, 09 February 2019

Growth in life expectancy during the last two centuries has been attributed to environmental change, productivity growth, improved nutrition, and better hygiene, rather than to advances in medical care. This column traces the development of medical care and the extension of longevity in the US from 1800 forward to provide a long-term look at health and health care in the US. It demonstrates that the contribution of medical care to life-expectancy gains changed over time. 

Lichtenberg, 08 February 2019

Given the relationships between innovation and growth and between growth and longevity, it seems likely that new ideas have played a major role in increased longevity. This column examines the impact of medical innovation on cancer survival rates and mortality in the US. The findings suggest that a significant share of the increase in the five-year observed survival rate between 1994 and 2008 may have been due to an increase in the novelty of medical ideas several years earlier. Turning to the impact of new cancer drugs specifically, it finds that drugs launched in 36 countries during 2006-2010 reduced the number of disability-adjusted life years lost to cancer in 2015 in those countries by about 8.7%.

Berthou, Jardet, Siena, Szczerbowicz, 08 February 2019

Escalating tensions between the US and its trading partners have made a global trade war more likely. In addition to the direct effect due to the increase in tariffs, a trade war may also affect GDP via indirect channels, such as a drop in productivity due to uncertainty and changes in the production environment. Using a multi-country model, this column shows that a global and generalised 10 percentage point increase in tariffs could reduce the level of global GDP by almost 2.0% on impact and up to 3.0% after two years, when all the additional indirect channels materialise. 

Schoenmaker, 08 February 2019

Leveraged finance is booming, just as it was in the run-up to the Global Crisis. As before, central banks are bystanders, with only banking instruments for macroprudential policy. this column argues there are unused regulatory powers that can rein in investment funds. A cross-sectoral approach would help to rein in the current unsustainable levels of leveraged finance.

Ashworth, 08 February 2019

On 17 October 2018, Canada legalised recreational cannabis use, with an immediate effect on how Canadian people use cash. Jonathan Ashworth explains to Tim Phillips how legalisation crimps the black economy.

Auer, Bonadio, Levchenko, 07 February 2019

The tide has turned in international trade, with watershed political moments across the world showing the growing popularity of protectionist measures. This column analyses the relationship between the distributional effects of trade and voting patterns by modelling a scenario in which NAFTA is dismantled. It finds that the areas that voted most overwhelmingly for the Trump administration are the same as those that would experience the greatest wage decreases if NAFTA were to be revoked, due to the strong correlation in areas that face import competition from and export exposure to NAFTA partners.

Niepmann, Schmidt-Eisenlohr, 06 February 2019

The issuance of syndicated loans, including leveraged loans, has grown substantially in the US. Institutional investors increasingly hold these loans. This column discusses how this has created a strong link between the dollar and US corporate credit conditions. When the dollar appreciates, institutional investors demand fewer loans on the secondary market, causing US banks to reduce lending and tighten credit standards. Risk appetite in global capital markets has become a key driver of credit supply to US firms.

Gouel, Laborde, 06 February 2019

Given our collective failure to mitigate greenhouse gas emissions, the world will have to adapt to a certain level of climate change. This may mean that as climate change affects crops’ yield potential, new patterns of comparative advantage, and hence new trade flows, will emerge. This column examines the importance of the market adaptations in mediating welfare losses in the agricultural sector. The findings suggest a large role for international trade: when adjustments in trade flows are constrained, global welfare losses from climate change increase by 76%.

Casari, Ichino, Michaeli, De Paola, Marandola, Scoppa, 05 February 2019

Although differences in social capital have been linked to a variety of outcomes, we know little about why it varies in the first place. Using experimental data from high schools in the north and south of Italy, this column argues that migration is one possible explanation. It finds that civic students in the south are more likely to emigrate when the local share of civic peers is either low or high compared to when it takes an intermediate value, while the opposite happens for uncivic students. Migration thus causes a ‘civicness drain’. 

Berlingieri, Pisch, Steinwender, 05 February 2019

Multinationals with large and complex production networks have become a dominant feature of today’s economies. But while their supply networks are large, this does not mean that they own every step of the global production chain. This column examines French firms’ decision whether to source imported inputs from independent suppliers or from affiliates. The results show that multinationals typically own and source from international suppliers that provide technologically important inputs – that is, those that account for a high share of costs. 

Desmet, Nagy, Nigmatulina, Young, 04 February 2019

The economic geography of transition economies has changed dramatically over the last quarter century, with large urban areas growing fast and many smaller places facing declining populations. Using a high-resolution spatial growth model, this column projects the transition economies as a whole to perform economically well over the next decades, especially the region’s densest places. Large-scale infrastructure projects such as the Belt and Road Initiative will have a positive impact, but not more so than modest reductions of general trade frictions. 

Almunia, Antràs, Lopez Rodriguez, Morales, 04 February 2019

The recommendation that firms reduce unit and labour costs to gain international competitiveness in response to domestic economic crises is based on the assumption that domestic and foreign supply decisions are not linked at the firm level. This column shows that in a monetary union, exports can have a significant impact in mitigating domestic slumps through the ‘venting-out’ mechanism. By reducing their use of flexible inputs relative to fixed, firms can achieve a short-term decrease in marginal costs to gain competitiveness abroad. This explains how an economic crisis and an export boom can take place at the same time.

Calvano, Calzolari, Denicolò, Pastorello, 03 February 2019

Antitrust agencies are concerned that the autonomous pricing algorithms increasingly used by online vendors may learn to collude. This column uses experiments with pricing algorithms powered by AI in a controlled environment to demonstrate that even relatively simple algorithms systematically learn to play sophisticated collusive strategies. Most worrying is that they learn to collude by trial and error, with no prior knowledge of the environment in which they operate, without communicating with one another, and without being specifically designed or instructed to collude.

Alesina, Carlana, La Ferrara, Pinotti, 02 February 2019

There is a lively debate whether biased behaviour can be changed through the use of ‘implicit bias training’ or awareness of stereotypes. Yet, there is no causal evidence to guide this debate. Using data on teachers’ stereotypes toward immigrants elicited through an Implicit Association Test in Italy, this column studies how revealing to teachers their own test score impacts their grading of immigrant and native students. Revealing stereotypes may be a powerful intervention to decrease discrimination; however, it may also induce a reaction from individuals who were not acting in a biased way.

Friebel, Manchin, Mendola, Prarolo, 02 February 2019

There is a general understanding that illegal migration only exists because of the smuggling industry. However, there is no reliable information on how migrants’ intent to leave their home country and come to Europe, for example, depends on the availability of smuggling services. This column uses data on migrant flows arriving at European borders after the effective opening to Libyan refugees of the central Mediterranean migration route, following the 2011 fall of the Gaddafi regime, to estimate the supply elasticity of the lucrative smuggling industry. Findings indicate that when the smuggling distance between country-pairs gets shorter, there is an increase in individual intentions to migrate.

O'Rourke, 01 February 2019

Trade growth is slowing down. But is it, as the media and populist politicians claim, the end of globalisation? Kevin O'Rourke tells Tim Phillips how economic history can answer the question, and what we can learn from the history of global trade.

Huang, Nelson, Ross, 01 February 2019

Heavily depressed housing prices and high contemporaneous rates of foreclosure have been observed in many low-income and minority neighbourhoods in US cities, suggesting foreclosures may have spillover effects within neighbourhoods. This column demonstrates that foreclosures affect the price of nearby homes and the risk of foreclosure on those homes. While our understanding of the aggregate impact of these spillovers is still limited, recent evidence suggests that it could be large. 

Acedo Montoya, Buti, 01 February 2019

Although the euro instantly became the second-most important global currency upon its creation, its internationalisation was not a primary concern for policymakers at the time. This column argues that while the euro area has full ‘monetary independence’, ‘monetary sovereignty’ needs to be built on the basis of a reassessment of the benefits and costs attached to the international role of the euro. It also argues that the former outweigh the latter. There is no silver bullet, however, that would rapidly increase use of the euro abroad. This requires a comprehensive package of measures and time.

Timmer, Miroudot, De Vries, 01 February 2019

A country that appears to be a dominant exporter in a particular good may in fact contribute little value when the production process is internationally fragmented. This column argues that countries today specialise in exporting activities, such as R&D, marketing or fabrication, rather than in exporting particular products. It proposes a new measure that tracks functional specialisation in international trade, and show that countries at similar levels of development can vary widely in their specialisation pattern.

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