Luca Fornaro, Federica Romei, 27 May 2022

Since the start of the pandemic, global demand for tradable goods relative to non-tradable services has been exceptionally high. This column argues that this unusual demand pattern can push the global economy into stagflation, driven by scarcity of tradable goods. Countries running trade deficits export high inflation abroad, while policies that boost production of tradable goods and current account surpluses act as a benign disinflationary force. Due to a free riding problem, national monetary authorities may fall into a coordination trap leading to excessively high unemployment. High energy prices exacerbate all these effects. 

Philip Verwimp, 27 May 2022

Since February, more than six million Ukrainians have left their country and as many have been internally displaced. As the Ukrainian army is a male-only institution, the war has led to the separation of many men from their spouses and children. This column argues that this factor may have unintended, long-term consequences for the welfare of Ukrainian households. It warns that a protracted war creates risks of intra-household conflict and higher divorce rates among these transnational household units. 

Eoin McGuirk, Marshall Burke, 26 May 2022

The humanitarian catastrophe unfolding in Ukraine has rightly commanded the attention of policymakers worldwide. However, Russia’s invasion of Ukraine will likely have consequences that echo far beyond the borders of either country. This column draws on recent research to discuss how the war’s impact on food commodity prices may shape the distribution of violent conflict in Africa. The authors predict an overall increase in inter-group conflict, yet this encompasses large spatial variation across countries, with the top agricultural producers exhibiting a decrease in conflict due to higher wages.     

Peter Cramton, François Lévêque, Axel Ockenfels, Steven Stoft, 26 May 2022

“Instead of outbidding each other and driving prices up,” on 25 March, the 27 EU nations decided to “pool [their] purchasing power” for the “voluntary common purchase of gas”. In short, they decided to form a buyers’ cartel. So far, difficulties have been identified, but what is needed is a systematic design effort addressing those difficulties. This column proposes a simple, but fairly comprehensive framework for an EU gas-purchasing cartel.

Michele Di Maio, Tilman Brück, 24 May 2022

The war in Ukraine is destroying the educational opportunities of young people. Research from a conflict in the Middle East tells us about the likely scale and persistence of the loss.

Marina Feliciano, Ethan Ilzetzki, Borui Niklas Zhu, 24 May 2022

The April 2022 CfM survey asked members of its European panel to assess the effects of an embargo on Russian gas on the German and EU economies. The majority of panellists assesses that an embargo on Russian gas would cut one to three percentage points from German GDP growth in 2022-3, if the German government offsets the costs with well-targeted fiscal policy. Estimates increase if the German government were to take no offsetting action. Additionally, a large majority thinks that the EU could weather such a ban with costs in the one to three percentage point range, even absent offsetting fiscal or monetary measures.

Romesh Vaitilingam, 21 May 2022

As Russia’s invasion of Ukraine continues and many call for a strengthening of sanctions, an alternative to a full energy embargo has been discussed in the form of EU tariffs on imports of Russian gas. The IGM Forum at Chicago Booth invited its panels of leading US and European economists to express their views. As this column reports, nearly three-quarters of the experts consider that high tariffs would be an effective measure to reduce the flow of revenues to Russia while limiting disruption to supplies to Europe. Several panellists suggest the significance of the elasticities of demand for and supply of Russian gas, as well as the mechanisms by which prices are set. 

Maarten Verwey, Laura Bardone, Kristian Orsini, 20 May 2022

Russia’s invasion of Ukraine has led the European Commission to revise its EU growth outlook downwards, and the forecast for inflation upwards. As this column discusses, by exerting further upward pressures on commodity prices, causing renewed supply disruptions and increasing uncertainty, the war is exacerbating pre-existing headwinds to growth, which were previously expected to subside. Nevertheless, the economy is expected to keep expanding, and inflation is set to gradually decline towards, though remain above, 2% throughout the forecast horizon. Should further disruptions in energy markets occur, the economy would not escape stagflation.  

Alexandra Avdeenko, Maximilian Kaiser, Krisztina Kis-Katos, 19 May 2022

Whether economic sanctions against Russia have real effects has been increasingly called into question. This column suggests that changes in e-commerce can demonstrate whether and how the 2022 Western sanctions contributed to de-linking Russia from the West. An analysis of trends in cross-border international online retail based on digitally recorded daily transactions data from 2,288 international and Russian companies shows substantial declines in Russia’s e-commerce transactions. About five weeks after the war started, revenues from e-commerce imports to Russia had fallen by half, with no signs of compensation by Russian retailers in the sample studied.

Oleg Itskhoki, Dmitry Mukhin, 16 May 2022

Despite an increasing number of sanctions imposed on the Russian economy since its invasion of Ukraine in February 2022, the ruble has appreciated back to its pre-war level. This column argues that the prevalence of import over export sanctions and the financial repression imposed in Russia, which lowered the local demand for foreign currency, have driven the appreciation. Despite the opposite effects on the exchange rate, the sanctions on imports and exports are equivalent in terms of their impact on consumption, welfare, and government fiscal losses. Nonetheless, the level of the exchange rate remains relevant for imports, savings, and monetary policy.

Michael Dooley, Peter Garber, David Folkerts-Landau, 12 May 2022

Recent sanctions imposed by the US on Russia have called into question the US dollar’s dominant role as a reserve currency. This column argues that sanctions will, in fact, reinforce the dollar’s dominance rather than weakening it. It emphasises the importance of ‘collateral’ demand for reserves, especially by developing countries. Countries which choose to exit the dollar bloc will have restricted ability to reassure foreign investors, which could impact a growth strategy that involves participation of centre country capital.

Deborah Winkler, Lucie Wuester, 11 May 2022

The trade disruptions resulting from Russia’s invasion of Ukraine have revealed the vulnerabilities of relying on a limited range of suppliers for imports with few substitutes. This column shows that the impact of the war through Russia’s participation in global value chains relates to its ‘upstream’ position.  Countries in closer geographic proximity to Russia face higher risks due to their greater direct trade links with Russia. But the countries that will be affected most severely are those in global value chains reliant on products from Russia with fewer substitutes, such as rare metals.

Barry Eichengreen, Yuriy Gorodnichenko, Kenneth Rogoff, 10 May 2022

The first of CEPR’s Rapid Response Economics series spells out a proposal to ensure that the economy of post-war Ukraine can recover. But what can the international community do, and how much will it cost?

Mevlude Akbulut-Yuksel, 10 May 2022

The Russian invasion of Ukraine has forced millions of Ukrainian children to leave their schools and homes. Such adverse shocks early in life can have profound long-term effects. This column presents evidence from WWII and the Vietnam War of how childhood war exposure had detrimental effects on education, physical and mental health, and labour market outcomes, even decades after the conflicts. The effects were most pronounced for girls and children of lower socioeconomic status. Policies that prioritise children are essential to reduce the enduring effects of war.

Kornel Mahlstein, Christine McDaniel, Simon Schropp, Marinos Tsigas, 06 May 2022

As relations between the West and Russia deteriorate, the imposition of a complete trade embargo by Allies on Russia appears increasingly likely. Using computable general equilibrium modelling, this column explores the short- to medium-term economic effects of such an Allied trade embargo. It finds that Russia would likely sustain sizable losses of upwards of 14% of real GDP. Allied economies are unevenly affected by the sanctions, with real GDP losses between 0.1% and 1.6%. Finally, if Russia were to impose countersanctions, rather than being a sanction target, losses to the Russian economy would be even greater.

Maksym Chepeliev, Maryla Maliszewska, Maria Filipa Seara e Pereira, 06 May 2022

The Russian invasion of Ukraine is disrupting global supplies of essential commodities, pushing prices higher, slowing trade, and driving down incomes. This column argues that developing countries that are large agricultural and energy importers are being hit hardest. While some commodity exporters might be able to step up exports to benefit from increasing global prices, they could experience a restructuring of their trade patterns, resulting in a lower integration into global value chains. Consumers across the world are worse off, with the poorest being impacted the most adversely.

Michele Ruta, 05 May 2022

The war in Ukraine has suddenly increased geopolitical risks. This column argues that firms will respond to the shock by reassessing security-related risks, leading to changes in the structure of supply chains. But given the capital in place, the cost of searching for alternatives, and factors such as wage differentials across countries, this process is likely to be gradual rather than sudden and will affect different sectors and products differently. It will not result in a reversal of globalisation, unless it is supported by pronounced government intervention.

Sandeep Baliga, 02 May 2022

The Russian invasion of Ukraine has been met with coordinated sanctions. Sanctions are designed to incentivise cooperation, but this column argues that those being used in practice are scattershot. Instead, sanctions on oil and gas exports are the most effective way to maximise the probability that Russia ceases its misguided attack on Ukraine. Such sanctions are most likely to target the elite who are closest to President Putin. Also, it is important that cooperation is defined clearly and to not go as far as regime change in Russia.

Alex 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.

Noam Angrist, Simeon Djankov, Pinelopi Goldberg, Harry 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.

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