Macroeconomic policy

Michele Andreolli, Paolo Surico, 29 April 2021

What is the consumption response to unexpected transitory income gains of different size and what are the aggregate demand implications of stimulus packages that target different segments of the population? This column explores these questions using responses to hypothetical questions in the Italian Survey of Household Income and Wealth. Families with low cash-at-hand display a higher marginal propensity to consume out of small gains, while affluent households exhibit a higher marginal propensity to consume out of large gains. For a given level of public spending, a fiscal transfer of a smaller size paid to a larger group of low-income households stimulates aggregate consumption more than a larger transfer paid to a smaller group.

Jonathan Muringani, Rune Fitjar, Andrés Rodríguez-Pose, 20 April 2021

Social capital matters for economic growth and development, but different types of social capital matter in very different ways. This column examines how differences in social capital across Europe shape regional economic growth. While ‘bridging’ social capital is linked to higher regional economic growth, ‘bonding’ social capital leads to lower growth. This is particularly the case in less-developed regions and in regions with a lower endowment of human capital. As the level of education increases, the need for bridging social capital declines, implying that bridging social capital and human capital are, to a certain extent, substitutes.

Eduardo Cavallo, Andrew Powell, 13 April 2021

Latin America and the Caribbean suffered from several regional preconditions in advance of the Covid-19 crisis, including weak health infrastructure, low growth, and inefficient taxation. Now the pandemic threatens to leave the region with even higher poverty levels, greater inequality, and debts across virtually all countries. This column recognises the severity of these challenges but also provides reason to hope. If Covid-19 produces the political will to move the region towards better policy frameworks and execution, something positive could come of the crisis.

Robert Gilhooly, Carolina Martinez, Abigail Watt, 13 April 2021

Emerging markets will be shaped by the US and Chinese policy stances in 2021. This column considers how the latest US fiscal package will interact with China’s policy normalisation and concludes that while President Biden’s American Rescue Plan should dominate a less expansionary stance in China, the boost to the global economy will be much more modest than one would typically expect. Specifically, the normalisation of goods consumption in developed markets and less import-intensive Chinese growth will curtail global goods trade, a key determinant of emerging market growth.

Paul Krugman, 12 April 2021

Nobel Laureate Robert Mundell passed away on 4 April 2021. In this column, Paul Krugman describes the evolution of Mundell’s contribution to economic thought and policy, from his early pathbreaking models that remain the foundation of modern international macroeconomics to his later views that were more controversial and less influential in the profession. He also offers an explanation of how the man who brought Keynesian analysis to the open economy and highlighted the difficult tradeoffs in creating a currency area could come to be seen as the father of both supply-side economics and the euro.

Other Recent Articles:

CEPR Policy Research