July 2020

Born, Dietrich, Müller, 31 July 2020

Sweden stands out from its European peers as the only country that did not impose a lockdown in response to the COVID-19 outbreak. This column uses this peer group to construct a synthetic control unit to approximate a counterfactual lockdown scenario for Sweden lasting from March 18 to May 17. The results suggest the lockdown would have reduced the number of COVID-19 infections by a half and deaths by a third.

Gallardo Albarrán, Inklaar, 31 July 2020

Modern economic growth has improved the lives of millions in an unprecedented way, but its unequal progression across the globe has resulted in high income inequality. Most of the cross-country differences in income levels are typically attributed to differences in productivity rather than to physical or human capital accumulation. This column argues that this has not always been the case: physical capital accounted for a much larger fraction of income variation at the beginning of the 20th century. More generally, the results of the study call for a reevaluation of the long-term determinants of relative economic performance over time.

Mohan, Thyagarajan, Muller, 31 July 2020

The nexus of economic development and environmental impact is at the core of current policy debates. This is often captured by an ‘environmental Kuznets curve’, an inverted-U shaped relationship between income and pollution levels. This column argues that, in contrast to conventional approaches, sustainability analysis should focus on the monetary damages of pollution, rather than the physical tonnage of emissions. It highlights a large divergence in the Kuznets curves based on these two approaches. In addition, it proposes a measure of GDP growth which adjusts for monetary pollution damages.

Violante, 31 July 2020

Most high earners bounce back from recessions. But Gianluca Violante tells Tim Phillips that, for the last 50 years, it has been a different story for low earners. 

Südekum, Stiebale, Woessner, 30 July 2020

The claim in a 2016 report from The Economist that a small group of ‘superstar firms’ were “once again dominating the global economy'' referred mostly to American internet giants, but recent research suggests that previous decades were more broadly characterised by a reallocation of market shares towards highly productive and profitable firms, with notable implications for competition, market power, and the income distribution. This column argues that a superstar firm pattern is also present in European manufacturing, and that it is considerably stronger in manufacturing branches in which industrial robots have been on the rise. Technological change seems to be a key driver for the emergence of superstar firms.

Pastor, Vorsatz, 30 July 2020

Active fund managers are widely believed to outperform during market downturns. This column uses daily returns from US active equity mutual funds to examine fund performance and investor behaviour in the midst of the COVID-19 crisis. It finds that active equity mutual funds underperform a variety of passive benchmarks, contradicting the popular belief that active managers outperform in downturns. In addition, investors have favoured sustainable funds during the crisis, suggesting that sustainability is now viewed as a necessity rather than a luxury good.

Bursztyn, Haaland, Rao, Roth, 30 July 2020

When outright racism is stigmatised, people may need justifications for publicly expressing anti-minority views. Using two large-scale online experiments, this column argues that people use justifications, such as the claim that immigrants cause crime, to excuse their anti-immigrant behaviour, even if they do not privately believe them. Prominent public figures such as populist politicians can thus generate waves of anti-minority behaviour by serving as suppliers of excuses.

Halaburda, Haeringer, Gandal, Gans, 29 July 2020

Since its launch in 2009, there has been increasing interest in Bitcoin and other cryptocurrencies. Initially mostly discussed in popular media, more recently a growing body of academic research has emerged on the topic, spanning many fields such as macroeconomics, law and economics, and computer science. This column focuses on the microeconomics of cryptocurrencies, specifically on their supply, demand, trading price, and the competition amongst different cryptocurrencies. It summarises the main findings in this literature over the past decade and establishes a base for future research.

Bertocchi, Dimico, 29 July 2020

COVID-19 pandemic is having a disproportionate impact on African Americans, who are dying at a rate two to three times higher than their population share. This column uses a detailed individual-level dataset from Cook County, Illinois, to explore the relationship between COVID-19 mortality and race. Not only are Black Americans disproportionally affected by COVID-19, but they also started to succumb to it earlier than other groups. Such asymmetric effects can be traced back to racial segregation introduced by discriminatory lending practices in the 1930s.

Jones, Tonetti, 28 July 2020

Data are nonrival in nature. Using a standard model in which firms produce differentiated goods using labour and data as fundamental inputs, this column explores the economic implications of this nonrival nature of data. It suggests that having consumers own their personal data instead of firms may help achieve two important goals. First, consumers would respect their own privacy. Second, consumers would have incentives to sell their data to multiple organisations, thus taking advantage of infinite usability.

Marie, Vall Castello, 28 July 2020

Many governments increased temporary sick-leave benefits in the wake of COVID-19, but the benefits are due to expire after a certain time. This column looks back at a 2012 policy change in Spain which radically altered the generosity of paid sick leave available to public-sector employees. Following the change, the number of sick leaves taken by public-sector workers dropped 29% but the likelihood of relapses increased, with most of it driven by infectious disease relapses. Policymakers need to manage changes in sick-leave generosity, especially in the face of persistent or recurring infectious diseases such as COVID-19.

Paloviita, Haavio, Jalasjoki, Kilponen, Vänni, 28 July 2020

The introductory statements made by the ECB are some of the most important sources of insight into the central banks’ policy goals. This column presents a textual analysis which seeks to measure the tone of the statements, with the aim of estimating the Governing Council's ‘loss function’. The results suggest that the ECB has been either more averse to inflation above the 2% ceiling, or that the de facto inflation target has been considerably below this threshold. The results also suggest that an inflation aim of 2%, combined with asymmetry, is a plausible specification of the ECB's wider preferences.

Balleer, Link, Menkhoff, Zorn, 27 July 2020

The relative importance of supply and demand during the Covid-19 pandemic is a key input into effective policy design. This column uses firm-level data on planned price changes by firms from a monthly survey covering all relevant sectors of the German economy to show that both demand and supply forces coexist, but that demand deficiencies dominate in the short run.

Cukierman, 27 July 2020

The use of helicopter money as a monetary policy response to Covid-19 has drawn significant attention over recent months. This column offers a comparison of helicopter money and quantitative easing, as used in the wake of the global financial crisis. By evaluating the similarities and differences, as well as the contrasting contexts of each crisis, key advantages and disadvantages are identified. It concludes that the two policy mechanisms may not be as different as first thought, and helicopter money could well be crucial in combating the economic effects of COVID-19. 

Choi, Ishikawa, Okoshi, 27 July 2020

It is well known that multinational enterprises take advantage of corporate tax systems worldwide to avoid taxation. Transfer pricing is one common method used for profit-shifting, as intra-firm transactions are shielded from the market mechanism. Numerous guidelines and regulations have been implemented to tackle such profit-shifting, but challenges remain. This column theoretically explores how one such regulation, the ‘arm’s length principle’, affects the licensing strategies of multinationals in the presence of a tax haven. It shows that the mere existence of this principle may lead to further profit-shifting and may worsen the welfare of high-tax countries. 

Reynaert, 26 July 2020

In 2009, the EU adopted one of the world’s most demanding emission standards for its automobile market, requiring automakers to reduce emissions by 18%. This column discusses the different strategies firms can adopt to comply with these requirements and analyses their respective welfare effects. Using data from the Netherlands, it finds a growing divergence between on-road fuel consumption and laboratory results since the new policy, suggesting strategic ‘gaming’ by automakers. The political environment, the enforcement of the policy, and strategic decisions by firms are crucial to evaluating the welfare consequences of the emission standard. 

Jaravel, O'Connell, 26 July 2020

The coronavirus pandemic has resulted in large shocks to both demand and supply, which conceivably could result in deflation, disinflation, or higher inflation. This column summarises findings, based on real-time scanner data in UK, on inflation among fast-moving consumer goods during the pandemic. It shows that at the beginning of lockdown there was a sharp upturn in inflation and a significant fall in product variety.

Cheema, Faff, Szulczyk, 25 July 2020

The COVID-19 pandemic has severely impacted the financial markets, which has triggered a flight from risky assets to safe haven assets. This column compares the performance of the safe havens across the world’s ten largest economies during COVID-19 and the 2008 Global Financial Crisis. The findings suggest that the character of safe haven assets has changed since the 2008 crisis. Gold, the traditional safe haven asset, has lost its glitter. However, the Swiss franc, the US dollar and US Treasuries retained their safe haven status, and Tether, a cryptocurrency, shows some promise.

Feenstra, Hong, 25 July 2020

In December 2019, the US and China reached a Phase One agreement, which mandates China to purchase additional imports from the US worth $200 billion in 2020 and 2021. This column shows that the most efficient way for China to increase imports from the US is to mimic the effects of an import subsidy. For agricultural products, this subsidy would need to be as high as 42% for 2020 and 59% for 2021 in order to meet the target. Such subsidies would divert agricultural imports away from other countries, especially decreasing Chinas imports from Australia and Canada.

Brandao-Marques, Gelos, Narita, Nier, 24 July 2020

There is no consensus in the literature on the optimal use of macroprudential policy to ‘lean against’ financial vulnerabilities. This column introduces a new empirical approach to study the effects of both macroprudential and monetary policies in response to looser financial conditions. It finds that tighter macroprudential policies can be very effective in mitigating emerging vulnerabilities, mainly by reducing the future volatility of output. In addition, such tightening is best accompanied by looser, not tighter, monetary policy.

Belot, Choi, Tripodi, van den Broek-Altenburg, Jamison, Papageorge, 24 July 2020

Almost all countries in the world have implemented drastic measures to contain the COVID-19 pandemic. This column documents the effects of the epidemic and containment measures using representative individual data on age and income from three Western and three Asian countries. Younger groups in all countries have been affected more, both economically and non-economically. Differences across income groups are less clear and less consistent across countries. The young are less compliant and supportive of the containment measures, no matter how hard they have been affected by them.

Altig, Baker, Barrero, Bloom, Bunn, Chen, Davis, Leather, Meyer, Mihaylov, Mizen, Parker, Renault, Smietanka, Thwaites, 24 July 2020

Measures of economic uncertainty derived from statistical models are not well suited to quickly capture shifts associated with sudden, surprise developments like the COVID-19 crisis, thus necessitating forward-looking measures. This column considers several such forward-looking indicators of economic uncertainty for the US and UK before and during the COVID-19 pandemic. All indicators show huge jumps in uncertainty in reaction to the pandemic and its economic fallout. Most indicators reach their highest values on record, but the extent of increases and time paths differ.

Coyle, Nguyen, 24 July 2020

The Covid-19 lockdown has provided the opportunity to measure the financial value we give to 'free' digital services like social media and Google search. Diane Coyle and David Nguyen tell Tim Phillips what they discovered, and whether this value should be counted in GDP.

Read the paper in Covid Economics 33

Papanikolaou, Schmidt, 23 July 2020

COVID-19 has massively disrupted the supply side of the world economy, shutting down entire industries. This column analyses how these disruptions affected different types of firms and workers by looking at how effectively different sectors can shift to remote work. While the major policy interventions in the US have treated all types of business as equivalent, industries which are not able to do their work remotely have been hit much harder than business that can. This cross-sectional dispersion shows up across a variety of measures, including changes in employment, revenue projections, likelihood of default, current liquidity, and stock returns. Going forward, aid that targets disrupted sectors may be a more cost-effective means to alleviate the impacts of COVID-19.

Chatterjee, Hanushek, Mahendiran, 23 July 2020

Expanding access to schools has been an important goal of development policy. This column studies the 2009 Right to Education Act in India intended to mandate compulsory and free access to schools for all children aged 6 to 14. It finds that the act led to an increase in the number of private tuition centres which partly crowded out the goal of more equal access to education as only children from wealthier households can afford private tuition.

 

Hull, 23 July 2020

The COVID-19 pandemic has placed pressure on central banks and other public institutions to monitor the economy at a higher frequency than usual. However, much of the data and expertise needed to perform such monitoring is concentrated in the private sector and academia. This column describes the effort made by the Swedish Riksbank to alleviate this bottleneck by opening up a collaborative public channel through which academics and the private sector can directly contribute to the research in real time.

Borgonovi, Andrieu, Subramanian, 22 July 2020

Areas with high levels of social capital may have been especially at risk during the early phases of the COVID-19 pandemic due to high levels of social interaction. At the same time, norms of trust and reciprocity could have contributed to reducing the health impact of the pandemic. Using data from US counties on COVID-19 cases and deaths, this column shows that disease spread was faster the higher the social capital in a community. However, case fatality rates between January and May 2020 were lower in communities with higher levels of social capital. As case numbers in the US start to rise following the relaxation of social distancing regulations, social capital may become an important social determinant of health.

Malkov, 22 July 2020

The lockdown measures have brought to light the importance of the nature of work. This column discusses how teleworkability and contact intensity of different jobs both shape the distribution of risks created by the pandemic. The existing distribution of working couples suggests that two-thirds of the US ‘dual-earner’ couples are exposed to greater intra-household contagion risk. About one-fourth are exposed to greater labour income risk. Patterns in skill requirements increase the likelihood of skill mismatch for the newly unemployed. These observations have direct policy implications whilst highlighting potential constraints on their effectiveness.

Acharya, Plantin, 22 July 2020

In the aftermath of the 2008 Global Crisis, ultra-low US policy rates have been coincident with significantly large positive shareholder payouts by US firms while investment growth has failed to keep pace with firm assets, leading to assertions of a causal link between the two trends. This column uses a parsimonious model to explain how a socially undesirable yet shareholder value-maximising crowding out of business investment by payouts can arise as an unintended consequence of aggressive monetary easing.

Beck, Flynn, Homanen, 22 July 2020

Most of the evidence on firm-level impact of COVID-19 so far has been for advanced economies. Using survey responses from early April across nearly 500 listed firms in ten emerging markets, this column reveals that the vast majority of firms have been negatively affected by COVID-19 and reacted by reducing investment rather than payrolls. Moreover, it finds that there is a surprising degree of support vis-à-vis employees, customers, other stakeholders and broader society. Stakeholder-centric firms experienced lower stock price declines during the crisis drawdown.

Burkhauser, Hérault, Jenkins, Wilkins, 21 July 2020

The share of total income held by those at the very top of the income distribution has been much analysed, but despite a rising share of women in the top 1% of the income distribution, less is known about the gender divide at the top. This column analyses gender differences among the UK top 1% between 1999 and 2015. The rising share of women in the top 1% is largely accounted for by women having increased the time they spend in full-time education by more than men did.

Boot, Hoffmann, Laeven, Ratnovski, 21 July 2020

Technological change in the financial industry is accelerating. Recent developments include new innovations and improvements on past trends. This column distinguishes between the information and communication channels of financial innovation and analyses their implications for financial intermediation. It suggests that innovations in these two dimensions may lead to big changes in the traditional bank business model. New policy priorities should focus on accurately assessing the operational risks and ensuring the robustness of these technologies.

Garel, Petit-Romec, 21 July 2020

The COVID-19 pandemic has brought uncertainty over the future of climate actions. This column studies the cross-section of stock returns during the COVID-19 shock to capture investors’ views and expectations about environmental issues. Firms with responsible strategies on environmental and climate issues are found to have had better stock returns between 20 February and 20 March 2020. Hence, the COVID-19 shock did not distract investors’ attention away from environmental issues but rather led investors to reward environmental responsibility to a larger extent.

Eichenbaum, Rebelo, Trabandt, 20 July 2020

Traditional epidemiology models generally don’t allow for interactions between peoples’ economic decisions and rates of infection, limiting their usefulness for forecasting and policy analysis. This column introduces a framework for combining economics and epidemiology in a way that allows for these interactions and uses the model to address the challenge of designing and implementing policies that improve the trade-off between economic and health outcomes during an epidemic. The results suggest that testing and quarantine policies should play a central role in minimising the social costs of the COVID-19 crisis. 

Dao, Das, Koczan, 20 July 2020

The declining labour share of income is a global phenomenon that has affected primarily low-skilled and middle-skilled workers. This column examines the effects of trade and technology on the labour shares of different skill groups using a new dataset covering both advanced and developing economies. Both trade and technology have contributed to the declining labour share of middle-skilled workers but have had little effect on low-skilled and high-skilled labour. Policies should be designed with the goal of spreading the benefits of globalisation to the entire labour force.

L'Huillier, Schoenle, 20 July 2020

Interest rates have remained close to zero in many economies since the Great Recession. This column explores the policy of raising the inflation target in order to generate greater macroeconomic ‘room’. Central banks face constraints when trying to achieve this extra room. The rationale is that by raising the inflation target, the private sector responds by increasing price flexibility. This lowers the potency of monetary policy and thereby endogenously removes part of the room generated by the higher target.

Arezki, Dama, Djankov, Nguyen, 20 July 2020

Street protests propagate across borders. This column provides evidence for contagious protests, using both actual and news-based measures of protests. The results point to social media as a vehicle for contagion.

Oksanen, 20 July 2020

One of the many reasons for slow progress with reforming the euro has been a lack of understanding of the links between the fiscal and monetary domains. This column argues that the Covid-19 shock necessitates a significant extension of the time horizon for fiscal policy.  Sound public finances means long-term sustainability of government finances, which is required for refunding public debt at acceptable interest rates. Bonds issued by the solvent governments are needed for the operations of the Eurosystem in setting the monetary stance and in acting as the lender of last resort for euro area governments, which is necessary for preventing liquidity shortages from developing into a general financial crisis.

Bartik, Cullen, Glaeser, Luca, Stanton, 19 July 2020

The COVID-19 crisis has necessitated a rise in remote working, but many challenges to its broader adoption remain. This column uses survey data from thousands of small businesses representing a wide set of industries, firm sizes, and regions across the US to understand how businesses are adjusting to the crisis. It finds that transition to remote working is uneven, with businesses in industries with higher income and better educated employees more likely to transition to remote working. Productivity effects are also uneven, with many firms becoming less productive as a result of the transition.

Santoleri, Mina, 19 July 2020

Direct public support for business R&D is common practice in many countries, but evidence on its causal effects has been mixed. This column exploits discontinuity in the assignment mechanism of the first large-scale European R&D grant programme to assess the impact of the policy. The results indicate that direct grants have positive and sizable effects on a wide range of firm-level outcomes suggesting that R&D grants are an effective policy tool. 

Schivardi, Romano, 18 July 2020

The COVID-19 crisis has induced a sharp drop in cash flow for many firms, possibly pushing solvent but illiquid firms into bankruptcy. This column presents a simple method to determine the number of firms that could become illiquid, and when. The authors apply this method to the population of Italian businesses and find that at the peak, around 200,000 companies (employing 3.3 million workers) could become illiquid due to a total liquidity shortfall of €72 billion euros. It is essential that policymakers shelter businesses by acting quickly, especially if there is a ‘second peak’ after the summer.

Hu, Levine, Lin, Tai, 18 July 2020

The financial conditions facing parents can have effects on children’s education outcomes, both in terms of schooling and parental support at home. This column presents evidence from the US, arguing that changes in banking regulation across states can cause changes in the experience of children through a number of channels. These effects are not uniform across household income brackets and can be mitigated when there are other family members such as grandparents that are able to help children with their personal development.

Lacroix, Méon, Oosterlinck, 18 July 2020

Rising populism has raised concerns that democracies may give in to authoritarian pressure. On 10 July 1940, exactly 80 years ago, the French parliament passed an enabling act granting full power to Marshal Philippe Pétain. Analysing how the Members of Parliament voted, this column shows that MPs belonging to a pro-democratic dynasty were more likely to oppose the act. Dynastic politicians may contribute to stabilising democracies by better resisting peer pressure.

Delatte, Guillaume, 17 July 2020

There was a risk of another euro crisis in Spring 2020. Yet, after a massive sell-off of peripheral bonds, the markets have stabilised. This column analyses the impact of events over the last months on euro area sovereign bond spreads. It finds that differences in healthcare capacity are reflected in bond prices, markets prefer fiscal transfers to loans-based financial assistance programs, and that ECB speeches have stronger effects than deeds during the crisis episode. Of all the euro area members, Italian spreads benefited most from the recent policy interventions.

Ashworth, Goodhart, 17 July 2020

Despite regular reports in the media over the past decade on the imminent death of cash amid rapid innovation in payment technologies, cash in circulation has actually been growing strongly in many countries. Perhaps unsurprisingly given coronavirus-related health concerns, there have recently been renewed calls to abandon cash and some observers have argued the virus will accelerate its demise. This column argues that the data so far indicate that currency in circulation has actually surged in a number of countries. While the economic shutdowns and increased use of online retailing have recently been diminishing cash’s traditional function as a medium of exchange, it seems that this has been more than offset by panic-driven hoarding of banknotes.

Fajgelbaum, Khandelwal, Kim, Mantovani, Schaal, 17 July 2020

In implementing lockdowns to combat the spread of Covid-19, policymakers have primarily imposed the same policies uniformly across locations within a city. This column studies optimal dynamic lockdowns within a commuting network, using a framework that integrates canonical spatial epidemiology and trade models and is applied to commuting data from three cities – Daegu, Seoul and New York. It finds that optimal spatial lockdowns generate substantially smaller income losses than uniform lockdowns for a given virus spread.

Kuvshinov, Zimmermann, 17 July 2020

While short-run deviations of the stock markets from the economy, such as the current COVID-induced gap, are common throughout history, stock market size should co-evolve with real activity in the long run. This column uses data from 1870-2015 for 17 countries to assess this prediction empirically. It finds that stock market size and GDP were closely linked until the 1980s but diverged markedly thereafter, with surging equity prices accompanied by stagnating growth. This long-run divergence is historically unprecedented and can be largely explained by a profit shift towards listed firms at the time of historically low discount rates.

Chen, Spence, 17 July 2020

The pandemic economy has exhibited sharp and, in many cases, deep contractions across a wide range of countries. Mobility has turned out to be a key factor in the co-evolution of the economy and the pandemic. This column estimates the magnitude of daily economic contractions by constructing a pandemic economy tracker based on mobility data and makes an important set of findings. First, speed of policy response is crucial in successfully navigating the pandemic economy. Second, it is substantially more difficult for larger economies to control the virus. Third, stock markets have generally rebounded faster than the economies they support. Finally, third wave countries, primarily emerging and developing economies, are having difficulty controlling the virus without substantial mobility restrictions and contractions.

Mokyr, 17 July 2020

Skilled artisans were needed to build, improve and mend the machines that powered the industrial revolution. Joel Mokyr tells Tim Phillips how this can help explain why the revolution happened when - and where - it did.

Aksoy, Ozcan, Philipp, 16 July 2020

At a moment when policymakers are putting increased efforts into tackling gender gaps in the labour market, it is worth asking whether robotization could worsen pay disparities between men and women. Using new evidence from 20 European countries, this column finds that men at medium- and high-skill occupations disproportionately benefit from robotisation, especially in countries where gender inequality was already severe. The authors recommend that governments pay attention to automation’s distributional issues, and increase their efforts to equip women and men equally with the skills most relevant for future employability. 

Seiler, 16 July 2020

Sharp changes in consumer expenditure may bias inflation during the Covid-19 pandemic. This column measures the effects of the Covid-induced weighting bias on the Swiss consumer price index by quantifying the changes in consumer spending using public data from debit card transactions, updating CPI basket weights and constructing an alternative ‘Covid price index’. There is evidence that Covid inflation was higher during the lockdown than suggested by CPI inflation. Persistent ‘low-touch’ consumer behaviour may lead to inflation being underestimated through to the end of 2020.

Gorton, Zentefis, 16 July 2020

Corporate culture is an important determinant of firm performance but has often been overlooked in economic research. This column presents a theory of the firm based on corporate culture. In firms, employees develop a product in house according to shared values, customs, and norms that each stem from a shared culture. Firms exist because, at times, corporate culture fulfils production more efficiently than detailed contracts would. Further, consistent with empirical evidence, this study shows how some mergers and acquisitions can fail and why corporate cultures are often hard to change once in place.

Baldwin, Forslid, 16 July 2020

Changes in working patterns inspired by Covid-19 may transform the development path of many economies. The column argues that, as we adjust to remote working, a new era of telemigration may drive demand for globalisation in services. This may be good news for many emerging economies, because they can exploit their comparative advantage in labour without having to manufacture goods.

Özgüzel, Veneri, Ahrend, 15 July 2020

Places differ in the degree to which they can maintain economic activity through remote working in the face of shocks such as the COVID-19 pandemic. This column assesses the capacity of regions in 30 developed economies to shift to remote working during a lockdown. Based on individual-level data on occupations from labour force surveys, it shows that cities – and in particular capitals – typically have a higher share of occupations suitable for remote working. This may offset some of the stronger negative economic impacts of COVID-related policies on cities. Regional disparities in the capacity for remote working also clearly reflect the level of education of the workforce.

Bossone, Natarajan, 15 July 2020

Governments and economists are now focused on the macroeconomic policies that can support economies during the Covid-19 pandemic. Yet, for policies to be effective and economies to function, payment systems and services must operate efficiently, reliably, and securely. The third column of this series analyses the role that a central bank digital currency can play in this context, and outlines the key steps required for its successful implementation. In addition, the column proposes improvements to the existing payments infrastructure to ensure continued operability, especially in times of emergency.

Greenwood, Hanson, Shleifer, Sørensen, 15 July 2020

There is a long-standing debate on whether financial crises can be predicted. This column draws on a chronology of past financial crises and data on credit and asset prices for a panel of 42 countries between 1950-2016 and finds that if there is a large credit expansion with an asset price boom, then financial crises are highly predictable. These results are used to motivate a simple indicator that identifies periods of potential credit-market overheating. The indicator is shown to predict past crises in advance, suggesting that policymakers have time to act and take prophylactic policy interventions.

Hanlon, Hansen, Kantor, 15 July 2020

Temperature can affect human health and mortality. Historical evidence on the changing relationship between temperature and mortality may be useful in today’s world as we consider adaptive strategies to face global warming. This column uses detailed weekly mortality data from London for 1866–1965 to examine how the temperature-mortality relationship changed as the city developed. In 1866–1914, high-temperature events increase mortality for several weeks, but much of the effect of high temperatures on mortality has disappeared after WWI. The change is linked to the significant reduction in infant digestive disease around 1900.

Chernozhukov, Kasahara, Schrimpf, 15 July 2020

Faced with COVID-19, people rationally and voluntarily respond to information on risks, making it difficult to distinguish the effect of containment policies from that of voluntary behavioural responses. This column examines the effect of mandatory mask policies on COVID-19 cases and deaths in the US. If the US had on 1 April 2020 universally mandated that employees of public-facing businesses use masks, there could have been nearly 40% fewer deaths by the start of June. Containment policies had a large impact on the number of COVID-19 cases and deaths, directly by reducing transmission rates and indirectly by constraining people’s behaviour, and account for roughly half the observed change in the growth rates of cases and deaths.

Bossone, Natarajan, 14 July 2020

Governments and economists are now focused on the macroeconomic policies that can support economies during the Covid-19 pandemic. Yet, for policies to be effective and economies to function, payment systems and services must operate efficiently, reliably, and securely. The second column of this series discusses the special role that government payments and international remittances play, in particular for developing economies, and identifies measures to ensure their accessibility and resilience especially at times of emergencies.

Li, Li, Macchiavelli, Zhou, 14 July 2020

Liquidity restrictions on investors, like the redemption gates and liquidity fees introduced in the 2016 money market fund (MMF) reform, are meant to improve financial stability during a crisis. However, by comparing the latest outflow episode due to COVID-19 to those in 2008 and 2011, this column finds evidence that these liquidity restrictions might have exacerbated the run on prime MMFs in this episode. Such severe outflows amid frozen short-term funding markets led the Federal Reserve to intervene with the Money Market Mutual Fund Liquidity Facility (MMLF). By providing ‘liquidity of last resort’, the MMLF successfully stopped the run on prime MMFs and gradually stabilised conditions in short-term funding markets.

Barrero, Bloom, Davis, 14 July 2020

One of the most urgent economic impacts of the Covid-19 crisis is on labour markets. Widespread job losses, drastic increases in unemployment benefit claims, and the rise of working from home have dominated the discussion during the pandemic so far. This column presents evidence from the US, arguing that the pandemic itself represents reallocation of labour within the economy. As different sectors and occupations are hit with variable severity, the authors argue that policymakers should be wary of this variation, responding with policies that will hold firm over time.

Carillo, Jappelli, 14 July 2020

Many developing countries do not have adequate health infrastructure or the capacity to effectively implement lockdown policies to contain the spread of COVID-19. This column studies the historical experience of Italy during the 1918 Great Influenza in order to shed light on the consequences of pandemics in societies where it is difficult to implement lockdown policies or where healthcare systems are lacking. Using regional GDP and mortality data, it finds a strong negative effect of the pandemic on local economic growth. However, these adverse effects mostly dissipated three years after the pandemic.

Gandal, Yonas, Feldman, Pauzner, Tabbach, 13 July 2020

COVID-19 deaths rates vary widely across European countries, from as low as 5 deaths per million in Slovakia to as high as 760 deaths per million in Belgium (as of May 13), and similar differences exist across US states. This column uses data on 32 in Europe and the 50 US states to show that the COVID -19 death rate is higher in countries and states with more long-term care beds. This provides evidence that living in long-term care facilities is a significant risk factor for death from COVID-19, and suggests that countries should adopt policies to protect their older populations living in such facilities before the second wave (likely) arrives. 

Bossone, Natarajan, 13 July 2020

Governments and economists are now focused on the macroeconomic policies that can support economies during the Covid-19 pandemic. Yet, for policies to be effective and economies to function, payment and settlement systems and services – collectively referred to as the National Payments System – must operate efficiently, reliably, and securely. The first column of this series identifies the challenges affecting payment services during emergencies and discusses measures to ensure that payment systems keep operating. Public authorities should be proactive in mitigating risks to payment systems to support economic activity and help the public.

Miles, 13 July 2020

A major policy issue for many governments is how long a lockdown introduced to slow the spread of the COVID-19 virus should be maintained. This column analyses what an assessment of costs and benefits of lockdown imply for how policy should be set in the UK. The question is simple: Has the length of the UK lockdown been warranted and should restrictions now be eased significantly? Using a wide range of scenarios for costs and benefits it appears as though extending the UK lockdown beyond three-months (that is beyond June) was not likely to be optimal.  

Reinders, Schoenmaker, van Dijk, 13 July 2020

The severe economic impact of the COVID-19 pandemic could threaten financial stability. Since accounting-based methods report loan losses with a delay, this column adopts a real-time, market-based assessment of the impact on corporate loan portfolios. Using European stock market data, it estimates that the market-implied losses for euro area banks could reach over €1 trillion, or, depending on the scenario, 7-43% of available bank capital.

Buti, 13 July 2020

Both the severity of the recession in Europe in 2020 and the subsequent bounce back of economies are likely to differ markedly across member states. Avoiding that the current crisis risks will be remembered as the Great Fragmentation is a key goal of the EU strategy. This column looks at the lessons learned during the financial crisis, and argues that a more consensual narrative, the lower risks of moral hazard and the rising political awareness that Europe has to count on ‘indigenous’ growth drivers provide a better chance of adopting an ambitious EU policy response. Whether it will also lead to deeper political integration, will depend on finalising long-lasting open institutional 'chantiers' such as Banking Union and Capital Markets Union.  

Buti, Giudice, Leandro, 13 July 2020

The crisis generated by the Covid-19 pandemic has required rapid and strong action. It also entails key choices, including on how the EU could help mitigate the impact of Covid-19, foster the economic recovery and support the dual green and digital transitions. In September 2019, before the crisis, the Directorate General for Economy and Finance of the European Commission organised a workshop on strengthening the institutional architecture of the EMU. This column introduces a new eBook which presents the main ideas discussed at the workshop.

Becker, Rubin, Woessmann, 12 July 2020

Over the past two decades, analysis of the relevance of religion has entered centre stage in the study of economic history, addressing questions such as how religion and religious beliefs in God and the afterlife have historically affected economies, and how historical socioeconomic circumstances have shaped religious beliefs and activities. This column derives a few general insights emerging from the rapidly growing literature.

Giannitsarou, Toxvaerd, 12 July 2020

We do not yet know whether individuals who recover from COVID-19 can be reinfected. If immunity wanes, the disease will become endemic, in sharp contrast to a model in which recovery confers permanent immunity. This column considers the possibility that immunity is indeed only temporary, and derives a stylised optimal containment policy to reduce the initial wave of contagion and then manage persistent infections. In practice, this means that partial lockdowns and social distancing measures may be the norm for years to come. 

Ciani, de Blasio, Poy, 11 July 2020

Large transportation infrastructure projects are considered a promising investment to spur economic growth in lagging areas by many policymakers. This column presents historical evidence that questions this assumption. It studies the most important Italian infrastructure project in the aftermath of WWII: the 440km freeway connecting the Southern regions of Italy. It finds, that while the freeway caused a significant reorganization of both economic activity and population from places far from the freeway to locations close to it, there is no evidence that it had any long-run effect on economic growth of the Southern region as a whole.

Kersting, Wohnsiedler, Wolf, 11 July 2020

Max Weber famously hypothesised that the Protestant work ethic fostered modern economic development. Does religion matter for economic success? This column revisits Weber’s hypothesis in the context of 19th-century Prussia. Protestantism did not matter for savings, literacy rates, or income levels across Prussian counties after 1870. Instead, there are large differences between ethnic groups, likely due to ethnic discrimination. Nationalism must be taken into account to understand Weber’s writings.

Makridis, Rothwell, 10 July 2020

There is significant dispersion in beliefs about the pandemic and its economic implications. This column uses new high-frequency and nationally representative data to document the overwhelming importance of political affiliation as a determinant of these beliefs and the adverse effects of partisanship on local economic activity. In the US, Republicans are significantly less worried about COVID-19 and less likely to expect a long-term disruption due to the virus. These results suggest that the macroeconomic effects of the pandemic on consumption may depend on behavioural factors, like political affiliation.

Beck, Saka, Volpin, 10 July 2020

A rapidly expanding literature has shown the importance of political economy factors for legislative and regulatory actions in the financial sector and ultimately financial sector stability and efficiency. This column reports on recent research in this field, presented at the first London Political Finance, including work on financial fragility leading to the rise of right-wing extremist parties, private interests in financial regulation, financial gains from political connections, political beliefs and financial decisions and the role of media in financial decisions.  It lays out some of the important takeaways and suggests directions for further research that can shed light on the remaining issues.

Müller, Hornig, 10 July 2020

The COVID-19 pandemic has spread massive economic uncertainty. But popular indicators were rather late in showing the size of the impact. To gauge the severity of future shocks in a timelier fashion, this column proposes a new taxonomy of economic uncertainty and an approach to measure it. In this vein it constructs a news-based indicator called Uncertainty Perception Indicator (UPI).

Coyle, Nguyen, 10 July 2020

Consumer spending patterns changed substantially during lockdown in the UK, as in other countries, with online consumption in general increasing. This column uses findings from a survey of the UK online population conducted before lockdown in late February 2020 and again in May to reveal some large and significant changes in the valuations of goods and services, with some large differences by age and gender. The lockdown has acted as a natural experiment testing the extent to which digital goods and physical goods are substitutes. The changes in valuation may indicate which services will be most valuable, and to which groups, in a post-pandemic world where more activity takes place online. 

di Mauro, 10 July 2020

In the recovery from Covid-19 we urgently need to boost productivity. But which policies move the needle? Filippo di Mauro tells Tim Phillips about what CompNet's firm-level productivity data tells us about both the problem and the solution.

Ganguli, Hausmann, Viarengo, 09 July 2020

Though women have achieved near parity with men among new hires at large law firms, they still hold notably few positions of leadership in the profession broadly. This column reviews international evidence of career trajectories in the legal sector using employment records from one of the largest multinational law firms. In addition to providing new facts about career dynamics for a sizable share of the global legal workforce, the column details differences in institutions and national cultures that contribute to disparities in gender mobility.

Falco, Zaccagni, 09 July 2020

Reminders to encourage social distancing have been used widely by the authorities around the world during the crisis. Based on a randomised controlled trial conducted in Denmark, this column shows what types of messages are most (and least) effective in convincing people to stay home. People’s good intentions often do not translate into the desired actions. Reminders significantly increase compliance with social distancing among people in poor health who face the greatest risks.

Eberle, Henderson, Rohner, Schmidheiny, 09 July 2020

Urbanisation is a major driver of economic development. Agglomeration forces that make cities productive and dispersion forces that limit their growth have been extensively studied, but the effect of ethnolinguistic diversity has been largely overlooked. This column shows that more diverse regions tend to experience more social tensions and conflict, less urbanisation, less urban concentration, and hence potentially less economic growth. This effect is however more confined to intermediate political regimes like fragile democracies, whereas a mature degree of democracy helps to defuse the negative impact of diversity on urbanisation.

Demirgüç-Kunt, Lokshin, Torre, 09 July 2020

Many countries have implemented non-pharmaceutical interventions such as lockdowns as a response to the COVID-19 pandemic. While the economic costs of such measures have been recognized, their size and importance have not yet been fully assessed. This column analyses high-frequency proxies of economic activity and suggests that lockdowns led to a decline of about 10% in economic activity across Europe and Central Asia. On average, countries that implemented lockdowns in the early stages of the pandemic are found to have better short-term economic outcomes and lower cumulative mortality.

Fiorini, Hoekman, Mavroidis, Nelson, Wolfe, 09 July 2020

The WTO membership faces many challenges, ranging from substantive rulemaking on policies generating trade conflicts to revitalising the multilateral dispute settlement system. This column reports on the results of a recent survey of the trade community regarding the priorities confronting the next WTO Director-General. There is a substantial degree of commonality in rank orderings of substantive issues for negotiation, institutional reform, and daily operations of the WTO, but underlying this are significant differences in rankings of issues and options across groups of respondents. Resolving the dispute settlement crisis is a clear priority for most respondents, especially government officials. 

Petri, Plummer, 09 July 2020

The US-China trade war has negatively affected global growth and trade prospects, redirecting supply chains and leading to inefficiencies. However, this column suggests that emerging mega-regional trade agreements, including the Comprehensive and Progressive Agreement on Trans-Pacific Partnership and the Regional Comprehensive Economic Partnership, have the potential to compensate for the trade war by reducing regional costs. Such agreements are likely to lead to deeper integration within Asia, especially among Japan, China, and Korea. They could also trigger further economic distancing between Asia and the US, and a large increase in the influence of China.

Gonne, Hubert, 08 July 2020

The shutdown of passenger air travel at the height of the COVID-19 pandemic slowed the spread of the disease but caused major economic losses for the sector. This column presents a cost-benefit analysis of the global freeze of passenger air traffic. While any conclusion is highly dependent on a handful of factors, including the controversial and difficult-to-calculate ‘value of a statistical life’, the simulations provide useful anchoring points at a time when governments are contemplating reopening air routes, as well as in the face of a potential second wave of infections.

Chen, Dasgupta, Huynh, Xia, 08 July 2020

Stay-at-home orders, when effective, can save both lives and the economy. Even though the short-term economic impact is very significant, not getting the pandemic under control can impose even higher economic costs in the future. This column studies the market reactions following staggered lockdown events across US states during Covid-19. It finds that returns on firms located in lockdown states are higher following the lockdown. These reactions can be interpreted as reflecting updated beliefs of market participants in the light of events that follow the lockdowns, such as compliance with stay-at-home orders.

Fiorini, Hoekman, Mavroidis, Nelson, Wolfe, 08 July 2020

The WTO is looking for a new Director-General. This column reports on selected results of a recent survey designed to help identify what the trade community thinks is needed. The results suggest strong support for someone with managerial and political experience, and a professional network that spans international organisations, major capitals, and international business. African respondents assign the highest priority to regional diversity. Overall, there is a distinct contrast between the preferred profile and that of the incumbent.

Thewissen, MacDonald, Prinz, Stricot, 08 July 2020

Paid sick leave is an important policy for protecting workers and their communities during a pandemic, serving not only to preserve jobs and incomes but also to contain the spread of the virus. This column examines how different countries implemented paid sick leave during the COVID-19 crisis. Evidence suggests such policies will facilitate an orderly end to lockdowns – and sustain workers during subsequent waves of infection – but only if temporary extensions are kept in place and broadened to include those workers currently denied coverage.

Vives, 08 July 2020

Low profitability, non-performing loans, and competition from Big Tech. A new report from the CEPR concludes that the banking sector faces "deep restructuring". Xavier Vives tell Tim Phillips why.

Read about the report and download it.

Götz, Laeven, Levine, 07 July 2020

Banks with more equity tend to lend more, create more liquidity, have higher probabilities of surviving crises and if they do, they tend to recover faster. The degree to which a bank issues new stock to replenish bank equity in response to a crisis is therefore crucial. This column shows that ownership structure is an important determinant of a bank’s new stock issuance during a crisis. US banks with greater insider ownership are found to have had significantly less common stock sales following the onset of the 2008 Global Crisis.

Facchini, Knight, Testa, 07 July 2020

The disproportionate arrest rates of black Americans is well established, but the relationship between racist police practices and political accountability is not. This column examines whether black voter turnout – which soared following the Voting Rights Act of 1965 – affected police departments in the southern US. It finds that an historically oppressed minority’s enfranchisement can lead to their improved treatment by police, but only when the chief law enforcement officers in a district are elected rather than appointed. While historical in nature, the findings have significant policy implications given ongoing debates about policing, race, and voting.

Hassler, Krusell, Ravn, Storesletten, 07 July 2020

The responses to Covid-19 have had direct economic consequences of historic proportions. In reaction to this challenge, this column was prepared by four main authors and then discussed within a large group of research-active macroeconomists who also signed the final document. The column discusses the nature of the shock and the challenges for economic policy in Europe in the current and next phases of the crisis. In addition to outlining some basic principles for guiding domestic economic policy, it also calls for clear communication of policy to minimise uncertainty, for cooperation across countries along several dimensions, and for a clear and unified strategy in the management of national debts.

Abate, Elgouacem, Kozluk, Stráský, Vitale, 07 July 2020

In response to the COVID-19 crisis, governments are taking equity stakes in financially distressed companies, potentially risking market distortions. Using micro-level evidence for OECD members, this column shows that in countries where state-owned enterprises are subject to the same market forces as their competitors, they perform on par with private firms. Additionally, it analyses OECD product market regulation indicators to gain insights into areas of corporate governance that would benefit from reforms. It recommends governments to impose strict recovery plans on the firms benefiting from state interventions, set clear conditions for exit from state ownership, and rely on independent advisors to ensure sound valuations of investments and divestments.

Verwey, Döhring, 07 July 2020

Forecasters agree that the economic fallout from COVID-19 has caused the sharpest drop in economic activity in Europe and globally since WWII. Just how deep the drop of activity was in the second quarter, which sectors were most strongly affected by containment measures, and how swift the rebound will be as they are gradually lifted is still very uncertain. This column describes how the European Commission’s Summer 2020 interim European Economic Forecast now estimates a deeper drop of output in the second quarter of the current year than was anticipated earlier. The recovery is also now expected to be less swift than was projected in Spring, with differences across Member States set to be more pronounced. Minimising hysteresis and avoiding persistent economic divergences within the EU and euro area requires the rapid agreement and deployment of common support measures at the EU level. The risk otherwise is of significant distortions to the internal market and of even deeper divergences between countries that could ultimately threaten the smooth functioning of the monetary union. 

Ilzetzki, 06 July 2020

The UK economy is suffering its worst recession in centuries, with national income declining and unemployment rising at unprecedented rates. This column reports on the latest Centre for Macroeconomics survey, which reveals that despite this worrisome news, the panel is optimistic that the UK economy will recover to its pre-pandemic trend within five years or less, no worse than past UK recessions. Panellists emphasised that these predictions depend on the government effectively containing the spread of the virus and not reverting to austerity policies following the pandemic. The panel was split on the biggest risks to the pace of recovery, with firms’ productive capacity, scarring effects of unemployment, and a slow demand recovery cited as prominent concerns. 

Dube, Simonov, Sacher, Biswas, 06 July 2020

US televised news networks offer strikingly different coverage of the COVID-19 pandemic, the exposure risks, and the benefits of social distancing measures recommended by health experts. This column devises an empirical strategy to test for a causal effect of news viewership on compliance with social distancing. It finds a large effect of local Fox News viewership on local compliance, with a persuasion rate of up to 26%. These findings reinforce concerns about the media’s role in sowing distrust in scientific evidence in the determination of public policies.  

Jinjarak, Ahmed, Nair-Desai, Xin, Aizenman, 06 July 2020

There is an importance relationship between prevailing market factors and the dynamics of the COVID-19 pandemic across the euro area. This column presents evidence to suggest that during the pandemic, adjustments in euro area credit default swap spreads diverge substantially from levels implied by theoretical models. Mortality outcomes and fiscal announcements account for a proportion of this divergence. Results also imply ‘COVID dominance’, whereby the widening spreads can lead to unconventional monetary policies that primarily aim to mitigate the short-run distress of the worst economic outcomes, temporarily pushing away concerns over fiscal risk.

Pollinger, 05 July 2020

Despite diverse and considerable efforts, the pandemic is keeping the world in a state of apprehension and discord. This column argues that eradicating Covid-19 is possible through a combination of case detection and social distancing, which would allow the pandemic to be eliminated at low additional economic and health costs. A simple function of observables, the optimal policy is easily implementable, but it raises important privacy concerns. The time to have a serious political discussion about these concerns has come.

Dubois, Sæthre, 04 July 2020

Differences in regulated pharmaceutical prices within the European Economic Area create arbitrage opportunities that pharmacy retailers can access through parallel imports. For prescription drugs under patent, parallel trade affects the sharing of profits among an innovating pharmaceutical company, retailers, and parallel traders. This column discusses recent findings showing that in a country which does not regulate pharmacy retailers’ margins, retailer incentives to bargain lower wholesale prices play a significant role in fostering parallel trade penetration, and that banning parallel imports would benefit manufacturers.

Popp, Vona, Noailly, 04 July 2020

Many governments worldwide are currently considering fiscal recovery packages to address the Covid-19 crisis. This column analyses the impact of past green fiscal stimulus on employment. Focusing on the American Recovery and Reinvestment Act after the Global Crisis, it finds that that the green stimulus was particularly effective in creating jobs in the long run, but not in the short run. Hence, while green stimulus packages are useful to reorient the economy and direct it onto a green trajectory in the longer run, they are less effective in restarting the economy quickly.

Bar-On, Cornfeld, Baron, Milo, Yashiv, 04 July 2020

Rapidly expanding research on COVID-19 in economics typically posits an economy subject to a model of epidemiological dynamics. This column shows that there are often serious misspecifications of the model, which erroneously assume a relatively slow-moving disease, thereby distorting the policy decisions towards less severe, delayed interventions. Moreover, the scale of the disease is underestimated.

Buiter, 03 July 2020

The US Federal Reserve – the world’s most important central bank – is not in a good place. This column outlines three flaws in the operating practices of the Fed – (i) its refusal to adopt negative policy rates, (ii) the build-up of significant credit risks through non-transparent (quasi-)fiscal actions, and (iii) stress testing analysis which fails to account for the severity of the COVID-19 crisis. It proposes a number of ways forward, including a symmetric policy rate around zero, a temporary ban on dividend payments, new equity issuance, and conducting a comprehensive stress test of the financial system.

Djankov, Georgieva, Maemir, 03 July 2020

Countries reform when their neighbours have reformed too, especially in the aftermath of economic crises. This column examines business regulatory reforms during 2004–2019. Previous crisis episodes have generated improvements in the law and administration of registering property, trading across borders, protecting investors and resolving bankruptcy. The current period of post-COVID-19 recovery is propitious for regulatory reform.

Muñoz, 03 July 2020

According to the evidence, banks in the euro area are particularly reluctant to cut back on dividends during economic recessions. That is, the bulk of the adjustment in the face of negative shocks that hit bank profits is borne by undistributed net income. This column argue that this pattern can notably exacerbate the impact of a negative supply shock such as the COVID-19 pandemic on bank lending and economic activity. Using a macro-banking DSGE model calibrated to quarterly data of the euro area economy, it concludes that restricting dividend distributions has the potential to significantly improve the effectiveness of the countercyclical capital buffer release in ensuring that banks keep funding households and firms during the COVID-19 crisis.

Basu, 03 July 2020

Kaushik Basu's time as World Bank chief economist inspired him to think radically about how to change the way the global economy works. He tells Tim Phillips about why public ownership and profit-sharing may be essential, and what we can still learn from Karl Marx.

Borowiecki, Dahl, 02 July 2020

Black Americans have been underrepresented in the nation’s creative industries since the end of slavery. This column argues that the implications of that marginalization extend beyond career choices into homes and neighbourhoods, as cities with thriving arts sectors also lead in job creation, innovation, and trade. The authors recommend that financial support for black artists be pursued in a systematic way, with policies that provide emerging black artists with access not only to relevant artistic networks, but also to supply-related organisations such as gallerists and publishers.

Beck, Döttling, Lambert, van Dijk, 02 July 2020

Banks fulfil several key functions in the economy, from improving the allocation of capital by extending credit to facilitating consumption smoothing through saving and borrowing. The creation of liquidity lies at the centre of much of a bank’s operations. This column provides evidence that banks' liquidity creation is associated with higher economic growth across countries and industries, with important non-linear effects. Results suggest that in the new ‘knowledge economy’ banks will have a more limited role, compared to other types of financial intermediaries and markets.

Bholat, 02 July 2020

Machine learning and artificial intelligence (AI) are at the heart of current transformations that some commentators have dubbed the ‘Fourth Industrial Revolution.’ The Bank of England, CEPR and Imperial College recently organised a virtual event to discuss how machine learning and AI are changing the economy and the financial system, including how central banks operate. This column summarises key topics discussed during the event and introduces videos recorded by some of the presenters, including Stuart Russell, Alan Manning, and the Bank of England’s Chief Data Officer, Gareth Ramsay. 

Borelli, Goes, 01 July 2020

Brazil has faced great difficulties in controlling the COVID-19 epidemic, having become the world’s epicentre of the coronavirus pandemic and recently reaching 50,000 fatalities. This column argues that the great heterogeneities between states in Brazil, together with difficulties in political coordination, may have shaped these consequences. Looking at five states, it investigates whether certain differences in the states’ intrinsic characteristics may have influenced the dynamics of the local epidemic. Governments may need to consider local conditions and adopt heterogeneous containment policies.

Nekoei, Weber, 01 July 2020

Temporary layoffs have exploded during the COVID-19 pandemic. This column analyses temporary layoffs in Austrian data and argues that the share of temporary layoffs contains information about employers’ forecasts of the future of their businesses.

Kasperskaya, Xifré, 01 July 2020

In the aftermath of crises, the state of public finances typically regains prominence in policy agendas. This column advances the hypothesis that three properties of the budgetary setup – reliability of projections, openness to scrutiny, and transparency – facilitate the exercise of the ‘budgetary analytical capacities’ of the government, legislature, and the wider public. It constructs an index of such capacities from the OECD Survey on Budget Practices. For the period 2012-2016, a simple measure of fiscal discipline is correlated with the index and is not correlated with other standard political-economy variables that are generally used to explain fiscal discipline.

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