April 2022

Di Falco, B. Kis, Viarengo, 30 April 2022

A high dependence on agriculture has left rural households in sub-Saharan Africa particularly vulnerable to the adverse effects of climate change. This column combines a multi-country panel dataset with precipitation records to re-examine the growing season in five sub-Saharan African countries, and the impact of frequent and extreme drought on a household’s decision to migrate. While the effects of recent weather shocks were modest, the cumulative impact of persistent exposure to drought over several years led to a significant increase in the probability of migrating.

Huber, 30 April 2022

Living through the COVID-19 crisis affected women and men differently. This column presents representative survey evidence from five European countries that women reduced their pre-pandemic consumption substantially more than men. Perceptions of infection risk and precautionary saving motives are only a partial explanation. Instead, men report realising that they had not missed certain goods and services during lockdown, while women attribute their reduced expenditures to perceived financial constraints – suggesting that women felt the economic consequences of the pandemic more intensely than men.

Thiemel, 29 April 2022

Microfinance has helped millions of the world's poor build better lives. But can it help the world's poorest people, who spend most of their lives growing food to feed their families, to diversify into other jobs? Jack Thiemel tells Tim Phillips about the impact of one of these projects, and what it tells us about the best ways to help the ultra-poor.

Download the free DP and read more about this research: 
Bandiera, O, Burgess, R, Deserranno, E, Morel, R, Rasul, I, Sulaiman, M and Thiemel, J. 2022. 'Microfinance and Diversification'.  CEPR

Cukierman, 29 April 2022

Russia’s invasion of Ukraine has stoked tensions between Western democracies and Russia, presenting the risk of an explicit conflictual situation. This column explores the bargaining advantages of democratically elected leaders relative to autocratic ones. The typically shorter terms in office of democratic leaders and greater accountability to their populations contributes to a greater aversion to armed conflict, as does the freer flow of information and typically greater aversion to military casualties. This lends insight to Western democracies’ refrainment from direct involvement in the Ukraine war.

Girma, Paton, 29 April 2022

Richard Posner argued that legalising assisted suicide may have the counter-intuitive effect of reducing unassisted and possibly even total suicide rates. This column examines the empirical evidence for this idea using data from ten US states that implemented an assisted suicide law up to the end of 2019. In contrast to Posner’s hypothesis, the real-world data suggest that assisted suicide laws lead to a substantial increase in total suicide rates and, if anything, are associated with an increase even in unassisted suicides. This effect is most pronounced amongst women.

Eo, Uzeda, Wong, 29 April 2022

Supply chain disruptions and labour shortages coupled with demand-side pressures have seen goods inflation soaring since early 2021. This column shows that while goods inflation used to contribute to permanently higher headline inflation, such as during the Great Inflation of the 1970s, since the early 1990s it has become predominantly transitory. The current high goods inflation can therefore be expected to be somewhat short-lived. Nonetheless, the authors document that the upside risks to longer-term aggregate and sector-specific inflation remain greater than usual. 

Georgarakos, Kenny, 28 April 2022

The COVID-19 pandemic shock posed an enormous challenge to fiscal policy in supporting household consumption. This column discusses the extent to which the pandemic-related fiscal interventions influenced consumers’ spending behaviour. Using new high-frequency data, the authors find that improving perceptions about the adequacy of fiscal interventions incentivised spending. Importantly, this perceptions channel operated equally strongly for consumers who received government support and for those who did not. Consumers who viewed the adequacy of fiscal packages more favourably also expected higher future incomes and easier access to credit, and did not anticipate an increase in taxes.

Égert, de La Maisonneuve, Turner, 28 April 2022

Investing in education and human capital is an important ingredient for economic growth. This column constructs a new aggregate stock measure of human capital data using OECD data on adult skills, quality of education, and mean years of schooling. The relative weights of quality and quantity are estimated rather than imposed, as they are in the existing literature. Improvements in human capital are estimated to boost productivity significantly, but only with long lags. Furthermore, simulating the impact of pre-primary education on human capital and productivity demonstrates the usefulness of the new measure for policy analysis.

Grislain-Letrémy, Villeneuve, 27 April 2022

The costs of natural disasters have risen dramatically over the last decades. Besides the escalating climate crisis, this rise in costs is largely explained by urbanisation in exposed, often flood-prone, areas. This column examines how land-use and insurance policies can limit urbanisation and explains how insurance policies shape real estate prices. Simple observed policies, with a prohibited red zone and a zone without insurance-tariff differentiation, are relatively efficient. Red zones must be redefined as climate risks or population pressures change.

Angrist, Djankov, Goldberg, Patrinos, 27 April 2022

School disruptions due to war, pandemics, or natural disasters can have persistent negative effects on learning outcomes. This column estimates the learning losses due to the Russian invasion of Ukraine. From a position of relative parity with its neighbours pre-pandemic, learning outcomes in Ukraine are now estimated to be below the lowest-performing countries in Europe. Opening classes for Ukrainian refugees, providing online or by-phone tutoring, or adapting curricula for refugees can help minimise the long-term impacts of the conflict.

Eichstädt, 26 April 2022

With the Donbas and towns in other regions of Ukraine rattled by the second phase of the Ukraine war, Germany and the rest of Europe are still struggling to find an effective response to the Russian aggression. This column uses negotiation analysis and non-cooperative game theory to argue that import taxes or tariffs can be a very effective way to influence the duration of the conflict. Implementing these in a clear step-by-step approach would increase the time pressure on Russia to end the war and raise the credibility of further actions.

Bas, Fernandes, 26 April 2022

The war in Ukraine has dramatically revealed the vulnerabilities of relying heavily on single foreign suppliers, following on from the COVID shock’s disruption of global value chains. This column presents evidence confirming the costly export shock for products with higher reliance on foreign inputs, and on China as the main input supplier, during the pandemic. In particular, the difficulties in producing remotely highlighted the vulnerability for products with a lower degree of complexity that rely on unskilled labour. Future resilience requires smart diversification and exploitation of working-from-home production.

Thorbecke, 26 April 2022

The Ukraine war and the Covid-19 pandemic provide windows to study the impact of exogenous shocks on the US semiconductor industry. This column uses high-frequency data to reveal that supply chain disruption did not severely damage the industry in the US. However, the US is less competitive than the East Asian countries in the semiconductor industry because of educational attainment, fiscal discipline, and employment incentives. Policymakers should be aware of these factors before subsidising the industry.

Beck, Bednarek, te Kaat, von Westernhagen, 25 April 2022

Standard economic models typically ignore the role of the financial system in transmitting exchange rate changes to the real economy. This column uses German data to show that large banks with high net foreign currency asset exposure increase lending to export-intensive firms and – through interbank markets – to small banks without foreign currency asset exposure but with a high share of exporting firms in their portfolio. Regions with such small banks experience higher output growth following the depreciation. It demonstrates the importance of banks’ balance sheet structures and interbank markets when assessing the real effects of exchange rate shocks.

de Mello, Tovar Jalles, 25 April 2022

Attitudes towards the environment have evolved over time, in part due to greater awareness about the challenges posed by climate change. Policy plays a part in this process, including through the decentralisation of policy responsibilities to the regional and local governments. This column shows that there is a link between policy decentralisation and attitudes towards the environment, with evidence from individual-level survey-based and aggregate national accounts data pointing to the potential for decentralisation to foster environmentally friendly attitudes and to influence policymaking.

Lafrogne-Joussier, Levchenko, Martin, Mejean, 24 April 2022

What are the potential costs of cutting Russian energy imports as a further tightening of the sanction regime? One of the many uncertainties regarding the size of these costs is related to the diffusion and amplification of the shock in production networks. This column discusses what can be learned on this topic from the analysis of firm-level data. Micro-level evidence suggests that some firms adjust, mitigating the effects of the shock. However, exposure to these shocks is heterogenous across firms. This has distributional consequences, with less exposed firms gaining market shares over more exposed ones.

Charness, Dreber, Evans, Gill, Toussaert, 24 April 2022

Peer review is central to the evaluation of research, but surprisingly little is known about its inner workings. This column presents the results of a survey of over 1,400 economists asking about their experiences with the system. The findings suggest that there are opportunities for improvement in the allocation and production of referee reports, as well as in the length of the process. The authors consider an assortment of proposals to address these issues, some of which command broad support from our respondents.

Prados de la Escosura, 23 April 2022

GDP per capita is a commonly used, but imperfect, proxy for human wellbeing. This column analyses the relationship between life expectancy at birth and per capita income over the past 150 years. It shows that life expectancy and per capita income growth behaved differently in terms of trends and distribution over the period. The relationship was particularly weak during the period 1914 to 1950. Separately, medical improvements and the diffusion of medical knowledge have been crucial drivers of life expectancy improvements across the world.

Deiana, Geraci, Mazzarella, Sabatini, 23 April 2022

Vaccine hesitancy has threatened the success of COVID immunisation campaigns worldwide, making the reasons that people refuse vaccination a central issue for policymakers. This column exploits a quasi-experiment arising from the suspension of the ChAdOx1-S vaccine – initially called AstraZeneca and later rebranded Vaxzevria – during the Italian immunisation campaign. The authors find that the suspension led to the public inflating the risk of vaccine-adverse events and in turn fuelled vaccine hesitancy, especially in areas with fewer cases. 

Blundell, 22 April 2022

Governments are desperate to create innovation hubs or attract tech companies to kickstart economic growth, but that creates winners and losers. Richard Blundell tells Tim Phillips how policy can balance the impact of innovation on inequality and create policies so that creative destruction and social mobility can go hand-in-hand.

Read more about the research behind this podcast and download the free DP:
Blundell, R, Jaravel, X and Toivanen, O. 2022. 'Inequality and Creative Destruction '. CEPR

Dominioni, Esty, 22 April 2022

The EU and the US are considering proposals for border carbon adjustment mechanisms to curtail the risk of carbon leakage. This column argues that these mechanisms can better mitigate climate change and more likely comply with WTO law when designed to account for effective carbon prices in exporting countries instead of focusing on explicit carbon prices alone. While there are administrative challenges to crediting effective carbon prices, existing trade accounting methods (notably from anti-dumping and countervailing duty subsidy cases) provide ample experience and know-how to overcome these difficulties.

Amato, Belloni, Favero, Gobbi, Saraceno, 22 April 2022

A European Debt Agency could greatly help in implementing a new fiscal policy strategy in Europe. This column identifies fluctuations in bond prices over the past 20 years that such an agency could have prevented, and argues that the agency could absorb the entire euro area debt while reducing its size due to less volatile price dynamics. A European Debt Agency could be used to hedge member states' financing from market sentiment vagaries, create a European safe asset, relieve the ECB of burden of debt management, and manage the implementation of fiscal rules efficiently.

Langot, Malherbet, Norbiato, Tripier, 22 April 2022

Following the invasion of Ukraine, the EU and the international community imposed financial sanctions and trade restrictions on Russia. This column analyses the costs for Russia and the EU of further trade restrictions with varying intensity. It shows that an embargo only by the EU would cost Russia three times as much as it would cost the EU. However, if an embargo were imposed by the EU and other countries ‘unfriendly’ to Russia, the relative cost would be 13 times higher for Russia. The adage that there is strength in unity has never been more relevant.

De Ridder, Hannon, Pfajfar, 21 April 2022

An expansion of the federal Pell Grant programme – the largest US scholarship programme that helps lower-income students attend college – has recently been proposed. This column shows that, besides the long-run benefits of making college more affordable, Pell Grants significantly raise local economic activity. Local income rises by 2.4% when Pell Grants increase by 1% of income, far exceeding the effect of, for example, defence spending. For-profit colleges raise tuition fees when grants become more generous, reducing the multiplier effect of grants at these schools. 

Wu, Li, 21 April 2022

Observers of the Chinese economy have long argued that the country’s practices in price statistics are the major barrier to more reliable measurement of its real growth performance. This column proposes a national accounts approach to address some of the biases behind the gap between the underlying real growth rate and the ‘real growth rate’ reported by the statistical authorities. Compared to the official estimates, the authors’ method not only exposes more volatile movements and greater impacts of external shocks, but also slower growth. 

Deng, Leippold, Wagner, Wang, 21 April 2022

Is the geopolitical crisis due to the Russian invasion of Ukraine likely to accelerate or retard the transition to a low-carbon economy? This column argues that stock prices reactions offer a preview of the future economic impact of the Russia-Ukraine war. These reactions suggest that the speed of transition to a low-carbon economy appears to be diverging between the US and Europe. These results obtain while controlling for ESG measures, inflation exposure, and international exposure of firms.

Hosoi, Johnson, 20 April 2022

The Russian war on Ukraine is financed in large part by the export of oil, and while countries have intensified various sanctions on Putin’s leadership group and the Russian economy, Russian oil export revenues since the invasion on 24 February have risen. A new CEPR Policy Insight argues that if the objective is to reduce Western financing of the Russian military effort, the only logical next step is for the US, the EU, the UK, and others to prohibit all Russian oil and oil product exports, and to make it illegal to carry such cargo in European-owned tankers.

Afunts, Cato, Helmschrott, Schmidt, 20 April 2022

Russia’s invasion of Ukraine will likely pose new challenges to the global economic recovery by affecting energy prices and inflation rates. This column uses a quasi-experimental analysis to document the impact on inflation expectations of consumers in Germany. The authors find that both short-term and long-term inflation expectations increased as an immediate result of the invasion. This increase can partially be attributed to consumers’ fear of soaring energy prices.

Gross, 20 April 2022

Compulsory invention secrecy is a policy tool used primarily for preventing technology leaks to foreign competitors. This column exploits a natural historical experiment to study the impact of compulsory secrecy on the wider innovation system. During WWII, the US patent office issued secrecy orders on more than 11,000 patent applications, halting their examination and prohibiting disclosure. The effects of this policy – which prompted incumbent firms to shift the direction of their research – persisted through 1960, restricting commercialisation and impeding follow-on innovation while successfully keeping sensitive technology out of public view. 

Michaillat, Saez, 19 April 2022

Empirically, the unemployment rate is inversely related to the vacancy rate. Furthermore, servicing a job opening costs about as much as one job in terms of resources. This column shows that the labour market minimises waste when the unemployment rate equals the vacancy rate. It is too slack when the unemployment rate is higher and too tight when it is lower. Consequently, the efficient unemployment rate is simply given by the geometric average of the current unemployment and vacancy rates. At the beginning of 2022, the US labour market is excessively tight, and tighter than at any point since 1951.

Brück, Di Maio, Miaari, 19 April 2022

Among the most pervasive of the economic consequences of conflict are those affecting children’s education outcomes. Focusing on the Second Intifada in the West Bank, this column documents how conflict events reduce Palestinian high-school students’ probability of passing their final exam, the total test score at the exam, and thus the probability of being admitted to university. Worryingly for conflict-affected counties like Ukraine, the negative effect of conflict on academic achievement may also have long-lasting consequences.

Federle, Meier, Müller, Sehn, 18 April 2022

The economic impact of global disasters differs vastly across space. The stock market reaction to the Russian invasion of Ukraine illustrates this clearly. This column compares the cumulative equity returns in 66 countries during a four-week window centred around 24 February 2022. The authors find a large ‘proximity penalty’ worth about 2.6 percentage points for every 1,000 kilometres a country is closer to Ukraine. Trade-related spillovers account for about two-thirds of this penalty. 

Beck, Janfils, Kpodar, 18 April 2022

Remittances continue to be an importance source of development financing, reaching $559 billion to low- and middle-income countries in 2019, but the high cost of sending remittances is a deterrent factor. This column provides fresh evidence on both cost- and risk-based constraints and market structures that are barriers to lower remittance fees. In particular, access to financial institutions, the size and structure of the remittance market, exchange rate stability, and the prevalence of cash transactions matter for remittance costs.

Altinoglu, Stiglitz, 18 April 2022

The interconnected structure of the financial system has been a focal point of debate among policymakers in the wake of recent financial crises. This column offers a theory to help explain the structure of the financial system and its consequences for risk-taking and systemic risk. The authors find that interconnectedness and excessive risk-taking reinforce one another and the anticipation of ex-post government intervention may exacerbate the systemic risk. The theory, in turn, has important implications for the design of macroprudential regulation. 

Wu, Hao, 17 April 2022

China expects its service sector to play an important role in helping the economy restructure. This column measures China’s investment in intangibles as a good indicator of an economy’s future creativity. China’s services sector does not invest sufficiently in intangibles. The Chinese wholesale and retail sector, for example, spends only 1.21% of its value added on intangible assets, compared to 5.7% in the US. Chinese wholesale and retail services would have to invest heavily in building strong brands to catch up with their US counterparts.

Asmus, Franck, 16 April 2022

National policies often fail to encourage development among local populations that need it most. This column provides historical perspective on the problem by considering Russian state power in the Southern Urals after an 18th century peasant rebellion. By exploiting regional discontinuities created by the boundary of rebel-held territory, the authors assess the causal impact of state intervention at the local level. They find that in the absence of relevant public policies, historical state capacity in the Southern Urals neither prevented a decline in industrial employment nor enabled the rise of a service sector. 

Anayi, Bloom, Bunn, Mizen, Thwaites, Yotzov, 16 April 2022

The war in Ukraine has led to an increase in economic uncertainty. This column reviews developments in a number of forward-looking measures of uncertainty that are available in close to real time. Daily measures of uncertainty have increased, but by much less than during the Covid-19 pandemic. Measures of subjective uncertainty derived from firm surveys have also increased, particularly those relating to future inflation. Almost half of UK firms saw the war as an important source of uncertainty for their business in March 2022. Factors such as energy use, demand, trade, and ownership are important determinants of business uncertainty regarding the conflict.

Braggion, von Meyerinck, Schaub, 15 April 2022

Inflation has resurfaced following the COVID-19 pandemic and the war in Ukraine, leading to a lively discussion on how individual investors could protect the real value of their financial wealth against rising prices. This column uses a unique dataset to provide empirical evidence that individual investors in Germany in the 1920s bought less (sold more) stocks when facing higher local inflation. The effect was more pronounced for less sophisticated investors. The authors also find a positive relationship between local inflation and forgone returns following stock sales. These findings point to individual investors suffering from money illusion. 

Pestova, Mamonov, Ongena, 15 April 2022

Following Russia’s invasion of Ukraine on 24 February 2022, the US, Europe, and many other countries imposed new economic sanctions on Russia. This column assesses the economic effects of these sanctions using a structural vector auto-regression model of the Russian economy. The findings suggest that industrial production, consumption, and investment will all decline, and that Russian GDP will contract by -12.5% to -16.5% in 2022. Nevertheless, the Russian economy will continue to rely on its existing export model, which may be difficult to undermine, even with potential oil and gas embargoes. 

Pinna, Picard, Goessmann, 15 April 2022

Ever since COVID-19 vaccines were introduced in late 2020, vaccine resistance has remained a common phenomenon. Lower willingness to get the COVID-19 vaccine has been associated with exposure to online misinformation. This column investigates the role of cable news on vaccine scepticism and vaccination rates in the US. It finds that exposure to Fox News reduces COVID-19 vaccination rates, while exposure to CNN or MSNBC does not. Cable media appears to shape beliefs about the effectiveness of COVID-19 vaccines.

Pinna, 15 April 2022

At the height of the Covid-19 pandemic, some cable news hosts cast doubt on the effectiveness of vaccines. Matteo Pinna tells Tim Phillips about his research on the impact of Fox News on vaccination rates.

Justino, 14 April 2022

The current and future civilian impacts of the war in Ukraine are immense. This column argues that the levels of vulnerability and resistance of civilians in wartime depend on three factors: the nature of violence during the war causing economic, psychological, and social disruption; the effectiveness of coping strategies employed by civilians, which depend on both economic needs and targeting by the enemy; and civilians’ own agency to both resist and shape the behaviour of armed forces. The Ukraine war is causing unmeasurable civilian suffering, but civilians may nonetheless shape the course of the conflict.

Reichlin, Ricco, Tuteja, 14 April 2022

The ECB has to decide not only on the timing and speed of exit from monetary easing, but also on the sequence. This column uses an empirical model to show that a short-term interest rate tightening in the euro area has undesired effects on output, inflation, and stock market prices if it is coupled with a widening of sovereign spreads. To be effective, the combination of monetary policy instruments as well as the sequence of the use of the tools in the announced tightening cycle must ensure both an increase in the position of the ‘risk-free’ yield curve and control of sovereign spreads. 

Inoue, Rossi, Wang, 14 April 2022

Estimates of fiscal policy multipliers differ widely in the literature. A possible explanation for this wide range of estimates is that the effects of fiscal shocks and the government spending multipliers vary over time, but what exactly determines them is an open question. Using a new time-varying parameter local projection with instrumental variables technique, this column sheds new light on the magnitude of time variation in the effects of fiscal policy shocks and multipliers. 

Jamet, Mehl, Neumann, Panetta, 13 April 2022

Central banks around the world are exploring the possibility of issuing retail central bank digital currencies. This column takes stock of advances in research on their possible implications for financial stability and monetary policy depending on their design. It also identifies avenues for further research that could usefully inform future policy decisions on such currencies.

Sturm, 13 April 2022

As Russia’s invasion of Ukraine continues, EU policymakers are weighing more severe sanctions. This column argues that unlike a full energy embargo, introducing small EU tariffs on energy imports from Russia could weaken the Russian economy while simultaneously making the EU better off. While larger tariffs would come at a cost to the EU, they are likely to be more efficient than other sanctions already in place.

Altuğ, Yesiltas, 13 April 2022

The 2014 Ukraine crisis resulted in sanctions being imposed on the Russian economy. This column analyses the economic uncertainty these sanctions generated and the impact on investment by Russian non-financial firms. It shows that investment in the non-financial sector declined after the sanctions were imposed. Sectoral variation in foreign exchange debt exposure, oil cost dependence, and exposure of inputs to indirect sanctions are all important mechanisms through which the heightened uncertainty operated. This has important implications for the Russian economy, which is facing severe sanctions as a result of the current war with Ukraine.

Domash, Summers, 13 April 2022

As inflation accelerates in the US, the Federal Reserve will raise interest rates in the hope of achieving a soft landing for the economy. This column uses historical data on unemployment and inflation to evaluate the likelihood that the Fed can lower inflation without causing a recession. The authors find that low levels of unemployment and high inflation are both strong predictors of future recessions, and that overheating indicators today suggest a very high probability of recession over the next two years. The likelihood of the Fed achieving a soft landing in the economy appears low. 

Ilzetzki, 13 April 2022

The March 2022 CfM survey asked the members of its UK panel how the Bank of England and the UK Treasury should respond to the economic fallout of the war in Ukraine on the UK economy. A solid majority of the panel think that the Bank of England should slow the pace of interest rate increases planned this year due to the events in Eastern Europe. The panel is nearly unanimous that the government should increase public spending, but is split on whether increased spending should exceed inflation and on whether taxes should be increased or cut in response to recent events.  

Laeven, Maddaloni, Mendicino, 12 April 2022

Monetary and macroprudential policies are key components of the central bank toolkit. This column argues that, when evaluating these policies, their trade-offs and interactions must be taken into account. Macroprudential policy may face a trade-off between credit growth and risk, whereas the trade-off in monetary policy concerns the intermediation capacity of banks and their risk taking. While monetary and macroprudential policies can both safeguard financial stability, the authors argue that the latter should be the first line of defence. These considerations have significant implications for central banks when deciding policy actions.    

Bricongne, Lecat, 11 April 2022

Despite the large capital outflows during the Covid-19 crisis, emerging economies did not make extensive use of capital controls. Indeed, these have had limited effects on capital outflows, being more effective on inflows. This column shows that macroprudential measures on the financial sector, which are increasingly part of the policy mix, have a positive impact on outflows when applied in the origin country and a negative impact on inflows when applied in the destination country. Cooperation between origin and destination countries, both on capital controls and macroprudential measures, has more than additive effects.

Buti, Messori, 11 April 2022

The EU’s domestic and international agendas are usually discussed in various forums. Given the fallout from the Covid crisis and the dramatic consequences of the Russian invasion of Ukraine, this column argues that these agendas should eventually merge. A central fiscal capacity is a key element for reconciling the EU’s domestic and international goals. Domestically, it would help achieve a balanced policy mix and ensure an adequate supply of European public goods, and globally it would give credibility to the geo-economic role of the EU. 

Breinlich, Leromain, Novy, Sampson, 11 April 2022

Import liberalisation brings down import costs and increases competition. But with scale economies, import liberalisation can also reduce the productivity of domestic industry by shrinking its scale, leading to lower exports.  As this column shows, evidence from the permanent normalisation of US trade relations with China in the early 2000s reveals that increased Chinese import competition indeed reduced US exports through this channel, implying the presence of industry-level scale economies in the US. Nevertheless, aggregate US openness still increased and the liberalisation raised US welfare.

Arendt, Dustmann, Ku, 10 April 2022

Many countries are considering reforms to their asylum procedures, particularly those policies that equip refugees for the labour market and manage their financial support. This column brings together evidence from four decades of Danish refugee policies and identifies two policies whose benefits have outweighed their costs: allowing refugees to choose where they settle, and labour market programmes that increase investment in language skills. Policies that emphasise early job-training, regulate access to welfare benefits, or use permanent-residency incentives, on the other hand, create long-run disadvantages for some migrants.

Barrios-Fernández, García-Hombrados, 09 April 2022

Between 30% and 50% of individuals sentenced to prison are reincarcerated in the two years after their release. Neighbourhood institutions that former inmates encounter after prison may play a role in encouraging crime desistance. This column examines the link between Evangelical church openings in Chile and reincarceration rates in the surrounding neighbourhoods. The opening of an Evangelical church in the neighbourhood significantly reduces 12-month reincarceration rates among recently released young inmates, suggesting that local institutions can provide a support network that helps former inmates cope and find work.

Berlanda, Cervellati, Esposito, Rohner, Sunde, 09 April 2022

Adverse health shocks fuel discontent. Social unrest can be driven by grievances with the provision of local public services. This column examines the effect of a large-scale health intervention – the expansion of HIV antiretroviral therapy – on violent events throughout Africa. Where the treatment was expanded, incidents of social violence dropped substantially at both country and sub-national levels. This finding shows that successful public health interventions can yield legitimacy to the state, help build trust, and serve as a ‘medicine’ against both ill health and conflict.

Martín Belmonte, Gelleri, Stodder, 08 April 2022

Some countries have issued their own central bank digital currencies, and many European economists favour such a currency too. This column shows that when properly designed, central bank digital currencies can help stabilise the financial and monetary system. Furthermore, a complementary currency backed by a central bank digital currency can not only compensate for the demise of commercial bank money, but it can also democratise money creation. The authors also show that complementary currencies can have higher multiplier effects on local expenditure, allow central banks to control circulation velocity, and help countries in currency crises.

Korinek, Loungani, Ostry, 08 April 2022

The large capital outflows from China since the onset of the war in Ukraine serve as a reminder of the volatility of capital flows. This column argues that the IMF’s recent acceptance of the occasional need for pre-emptive use of capital controls to increase resilience against volatile capital flows continues the welcome evolution of the international financial institution’s policies. The framework should continue to evolve to provide countries with policy space when capital flows impinge on domestic objectives (e.g. reducing inequality) or generate international spillovers.

Burlig, Jha, Preonas, 08 April 2022

Electricity blackouts continue to impose major costs on firms and households around the developing world.  There are many causes for these blackouts, including limited electricity generating capacity and failing distribution infrastructure. This column provides an additional explanation for India’s blackouts: utilities choose to purchase less electricity from the wholesale sector when procurement costs are high, leading to less electricity reaching end-users. India could reduce blackouts by making its existing fleet of power plants available to generate more often, which would require addressing ongoing inefficiencies in Indian electricity supply.

Becker, 08 April 2022

Syria, Venezuela, Ukraine: forced migration is constantly in the news, but these events have been happening for hundreds of years. Sascha Becker tells Tim Phillips about new research that is discovering the economic impact of mass displacement in history, both on refugees and on communities – and the lessons we can learn from the past.

Horn, Reinhart, Trebesch, 08 April 2022

China and Russia have built close financial ties over the past ten years, with Russia becoming the largest recipient of Belt and Road lending. Given the sums at stake, the war in Ukraine is putting China’s overseas lending portfolio at higher risk than ever before. This column argues that this is likely to make Chinese state-owned banks more cautious in extending fresh international loans and in rolling over old ones. Because China is a common lender to many developing countries, they now face the added risk of a ‘sudden stop’ in foreign lending. 

Becker, Eichengreen, Gorodnichenko, Guriev, Johnson, Mylovanov, Rogoff, Weder di Mauro, 07 April 2022

The scale of destruction in Ukraine is already staggering. A new CEPR publication builds on prior experiences with reconstruction following both wars and natural disasters to outline some principles for the future reconstruction of Ukraine. Efforts should include putting the country on the path to EU accession; establishing a stand-alone EU-authorised agency with autonomy to coordinate and manage aid and reconstruction programmes; recognising that Ukraine must own its reconstruction; encouraging inflows of foreign capital and technology transfers; a focus on grants rather than loans; and rebuilding around the principle of a zero-carbon future.

Ferrara, Mogliani, Sahuc, 07 April 2022

Following the Russian invasion of Ukraine on 24 February 2022, financial stress indicators suddenly increased. Using this high-frequency daily information conveyed by financial markets, this column presents a newly developed mixed-frequency quantile regression model in order to quantify macro risks in the euro area for the first quarter of 2022. The authors show that macro downside risks perceived by financial markets in the euro area are about three times higher than those for the US economy.

Carrillo-Tudela, Comunello, Clymo, Jäckle, Visschers, Zentler-Munro, 07 April 2022

The strength of the labour market recovery from Covid-19, and the extent of the economic scarring, depend on both job creation and whether job seekers look for jobs in the growing sectors of the economy. This column uses a novel dataset to provide direct evidence on the types of jobs sought by workers during the pandemic. It shows that workers increasingly targeted jobs in expanding occupations and industries. Nevertheless, a significant proportion of workers targeted jobs in declining occupations and industries. These workers tend to be the most disadvantaged: the non-employed and those with the lowest education qualifications.

Bachas, Fisher-Post, Jensen, Zucman, 06 April 2022

Globalisation has wide-ranging effects on tax systems. This column uses a new dataset of taxes on capital and labour across countries and time to assess these dynamics. The authors document a global convergence of average effective labour and capital taxes over time, as labour taxes have increased and capital taxes fallen. However, the large fall in capital taxation in developed economies contrasts its gradual rise in developing economies, albeit from a low base. This trend is consistent with evidence suggesting the causal effect of trade integration on the tax capacity of developing economies.

Baldwin, Freeman, 06 April 2022

Supply disruptions caused by systemic shocks such as Brexit, Covid, and Russia-Ukraine tensions have catapulted the issue of risk in global supply chains to the top of policy agendas. In some sectors, however, there is a wedge between private and social risk appetite, or increased risks due to lack of supply chain visibility. This column discusses the types of risks to and from supply chains, and how supply chains have recovered from past shocks. It then proposes a risk-reward framework for thinking about when policy interventions are necessary.

Tsyrennikov, 06 April 2022

Since Russia’s full-scale offensive began in late February 2022, many civilians have died and Ukraine has suffered massive destruction of its infrastructure. This column attempts to put a figure to the economic damage suffered by Ukraine by comparing its growth path to that of similar Eastern European countries. It estimates that the combined effect of Russia’s 2014 invasion and the current war will cause damage in the region of $1.36 trillion to the Ukrainian economy. And unless there is a large spur in Ukraine’s growth potential, these losses will continue to grow for several year.

Brunnermeier, James, Landau, 05 April 2022

The freezing of Russian foreign exchange reserves will have long-term and systemic consequences. This column argues, however, that the dominant role of the dollar as a reserve currency will be unaffected. No other country can provide the world with a large, liquid government bond market and a fully open capital account. Sanctions may have significant long-term effects on the demand for reserves. Countries may reduce their dependence on reserves by limiting their exposure to financial shocks and partially restricting capital movements. The international monetary system may evolve towards to a new architecture, where cross-border financial integration is reduced.

Ragoussis, Timmis, 05 April 2022

Digital technologies have played a crucial role in helping firms weather the worst of the COVID shock. This column uses a dataset containing information on 150 million active websites around the world to measure the impact of COVID-19 on technology adoption. The authors find that the timing of lockdowns strongly predicts increased use of e-commerce and online payment technologies. The shock appears to have resulted more in a trend shift than a shift in levels, suggesting that COVID-19 may have transformed the trajectory of online market growth.  

Ahmed, Borio, Disyatat, Hofmann, 04 April 2022

Nominal interest rates in many advanced economies have been low for more than a decade. This column presents evidence that monetary transmission to economic activity is substantially weaker when nominal interest rates fall to very low levels, and that the strength of transmission tends to wane the longer interest rates stay low. This suggests that the observed flattening of the Phillips curve has gone hand in hand with a corresponding steepening of the IS curve. If so, monetary policy trade-offs have become more challenging. 

de Zwart, Gallardo Albarrán, Rijpma, 04 April 2022

The Cultivation System implemented by the Dutch in Indonesia forced Javanese peasants to devote a substantial share of their land and labour to the production of various cash crops in exchange for a small payment. This column examines how the regime affected the health of the population in 19th-century Java. The authors find that a higher number of workers called up for labour in the Cultivation System is related to a higher mortality rate. Whereas previous studies highlight beneficial economic outcomes of the extractive system, this finding suggests the immediate effects on the Javanese population were highly negative. 

Bobeica, Ciccarelli, Vansteenkiste, 04 April 2022

The recent inflation increase across advanced economies has rekindled a debate about the risk of wage–price spirals. This column looks at pass-through from labour cost to price inflation for the US and euro area countries, and finds that the risk is state dependent. Wage–price spirals are less likely with low inflation and anchored expectations. The pass-through is also shock-dependent, being larger with demand shocks. Finally, the degree of pass-through is linked to secular trends mostly outside the control of central banks.

Diaz-Cayeros, Espinosa-Balbuena, Jha, 03 April 2022

The Conquest of Mexico brought both extreme violence and pandemic disease to vulnerable indigenous communities. This column draws upon pre-Columbian and contemporary Spanish sources to show that the average population of a sample of 1,093 Conquest-era settlements in the historic core of Mexico fell from 2,377 in 1548 to 128 in 1646, and 36% disappeared entirely by 1790. Yet, 13% ended the colonial era larger than they began. Indigenous communities proved more resilient where they had existing production processes for goods complementary to global trade that were also difficult to replicate, monitor, and therefore coerce. 

Brandily, Hémet, Malgouyres, 02 April 2022

Research consistently shows displaced workers suffer long-run earnings losses, but is this compounded with productivity enhancing reallocation? This column uses data from France to study the wage policy and productive performance of the firms in which displaced workers are re-employed. The authors find that wage and productivity ladders are not always collinear – workers can fall from one while climbing the other. Rather than slowing down the process of reallocation, the authors suggest exploring ways to mitigate the private cost they impose on workers. Alternatively, policy could focus on enhancing workers’ bargaining power in destination firms.

De Grauwe, Ji, 02 April 2022

Trust impacts many aspects of economic life and plays some role in standard macroeconomic models. This column analyses the importance of trust in a more systematic way using a behavioural macroeconomic model. The authors find that large negative supply shocks lead to a bifurcation between good and bad trajectories of output, inflation, and trust. Initial conditions matter in determining which trajectory will be chosen. The model helps to understand and predict the experience of the 1970s with the supply shocks and the recent Covid supply shock.

Besley, 01 April 2022

Scientists create innovation. Is this because they are paid to do it, or because they care about the outcome? Tim Besley tells Tim Phillips how motivated science drives down the cost of innovation and may accelerate the green transition.

Read more about the research behind this and download the free DP:
Besley, T and Persson, T. 2021. 'Science as Civil Society: Implications for a Green Transition'. CEPR

Arezki, Nysveen, 01 April 2022

The sanctions placed on Russian oil may give new impetus to the energy transition by encouraging developed economies to find new sources of energy. Current policy has focused largely on supply-side responses to manage this development; this column argues that demand-side policies may also play a critical role. The authors argue for policies that increase the price elasticity of oil demand, such as incentives for individuals to switch to electric vehicles through subsidies. Nonetheless, they emphasise that the distributional effects of policies, including carbon pricing, are politically important and cannot be ignored. 

Micossi, 01 April 2022

There have been various proposals for how to manage the sovereign debt portfolio accumulated by the Eurosystem in its efforts to raise inflation and provide emergency support in response to the pandemic. This column argues that the euro area needs a new mechanism to free the Eurosystem of the encumbrance of its sovereign portfolio. Such a mechanism cannot be provided by the Eurosystem itself, since this would eventually be inconsistent with its mandate. Instead, the European Stability Mechanism could perform that task while respecting all relevant European law.

Artuc, Falcone, Porto, Rijkers, 01 April 2022

The conflict in Ukraine has led to a surge in food prices, particularly wheat and corn. This column uses a newly developed toolkit to analyse the welfare impacts of food price inflation on households in developing countries. Average household welfare decreases in 43 of 53 countries in the sample, with an average real income loss of -1.5%. This impact varies substantially both across and within countries, with poorer households suffering systematically larger welfare losses. Protracted price increases will have long-term consequences for prosperity in many of these countries, exacerbating issues of poverty and inequality.


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