Microeconomic regulation

Matthieu Bussière, Jakob de Haan, Robert Hills, 20 January 2021

Despite being a central question in international macroeconomic policy debates, there is still only limited empirical evidence on the extent to which macroprudential policy affects the transmission of monetary policy and the propagation of shocks across borders.  This column presents findings from the latest project of the International Banking Research Network. The interactions between monetary and macroprudential policies are shown to significantly alter cross-border bank flows across a wide range of countries, though the magnitudes differ appreciably across countries and instruments.

Arik Levinson, Lutz Sager, 05 January 2021

Minimum standards for automobile fuel economy were first set in the US in the 1970s, and have since spread to Europe, Asia, and now Latin America. Regulators claim the rules save car buyers money on average, implying a market imperfection or behavioural anomaly. This column presents new evidence that those averages mask enormous variation. While some drivers could likely save money by spending more upfront for efficient cars, many others overspend for efficient cars they rarely use. Demographics, not economics, determine car choices.

Egle Jakucionyte, Swapnil Singh, 09 November 2020

Mortgage markets are dynamic in nature, which sometimes comes at a cost. This column shows that over the last few decades, the US mortgage market experienced a secular decline in co-borrowers. Having a co-borrower minimises the exposure and effects of adverse income shocks and thus should enhance mortgage performance. The authors show that this yet unexplored decline in co-borrowers therefore has non-trivial implications for the financial stability of the mortgage market and regional economic outcomes. 

Anna Stansbury, Lawrence H. Summers, 02 June 2020

Since the early 1980s, the US has seen a falling labour share and slow wage growth for typical workers, while measures of corporate valuations and measured markups have increased. A number of papers have argued that increasing monopoly or monopsony power can explain these trends. This column argues instead that the decline in worker power in the US economy is a more compelling explanation for recent macro trends than a broad-based rise in monopoly power.

David Argente, Salome Baslandze, Douglas Hanley, Sara Moreira, 28 May 2020

Patents are at the heart of policies designed to incentivise innovation and productivity growth. In recent years however, while patent activity has skyrocketed, innovation and productivity growth have not. This column collects data on product innovations and links those to their respective patent. While patent filings are found to be followed by product innovations overall, this relationship is much stronger for firms with lower market share.

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