Nicholas Crafts, 15 January 2019

Brexit in 2019 and the banking crisis in 2007 to 2009 are usually seen as unrelated events. This column argues that they are in fact closely connected. The austerity policies embarked on in response to the fiscal damage resulting from the banking crisis triggered the protest votes of left-behind voters, which at the margin allowed Leave to win the referendum vote. The implication is that the economic costs of the banking crisis are much larger than is usually supposed.

Ashoka Mody, Milan Nedeljkovic, 14 January 2019

The ECB’s actions in the wake of the Global Crisis have been described as hesitant, relative to other central banks. Based on analysis of financial markets' response to the ECB's interventions during the euro crisis, this column argues that central bank interventions are effective if they clearly signal a commitment to reinvigorating the economy and if they address the source rather than the symptom of financial stress. The ECB did not follow these principles, limiting its ability to improve financial market sentiment. 

Mathias Hoffmann, Egor Maslov, Bent Sørensen, Iryna Stewen, 10 January 2019

Bank-to-bank lending in the euro area has increased, direct cross-border lending has not. The column shows that dependence on domestic banks reduces risk-sharing in a crisis, reducing GDP growth in affected country-sectors. Benefits from banking integration are only robust to global shocks if banking integration takes the form of cross-border lending to firms and households.

Emmanuel Dhyne, Jozef Konings, Jeroen Van den bosch, Stijn Vanormelingen, 07 January 2019

Although information technology has reshaped the way businesses operate, measuring IT capital in firms is challenging. Using an exceptionally rich firm-level dataset from Belgium, this column finds that large firms benefit more from IT than small firms, and that IT explains about 10% of the productivity dispersion. IT has contributed to Belgian GDP and productivity growth prior to the Global Crisis, but the recession seems to have led firms to forgo investment in IT. Achieving optimal IT investment levels could reinvigorate productivity growth.

Sharmin Sazedj, João Amador, José Tavares, 24 December 2018

When appointing a CEO, firms can choose a newcomer or someone who has been at the firm for a long time. Using data on Portuguese firms in the wake of the Global Crisis, this column finds no performance gap between newcomers and experienced CEOs in the period prior to the crisis. During the crisis, however, firms run by newcomer CEOs outperformed those run by experienced insiders. Newcomers attain higher productivity by making different decisions regarding personnel, expenditure, investment, and international trade. 

João Granja, Christian Leuz, Raghuram Rajan, 04 December 2018

Risk taking was pervasive during the Global Crisis even in the most unlikely areas, such as stretching to lend at a distance. Using US data, this column examines the degree to which competition amongst lenders interacts with the cyclicality in lending standards using a simple and policy-relevant measure, the average physical distance of borrowers from banks’ branches. It finds that distances widen considerably when credit conditions are lax and shorten considerably when credit conditions become tighter. A sharp departure from the trend in distance between banks and borrowers is indicative of increased risk taking. 

Tobias Adrian, John Kiff, 01 December 2018

The financial system has undergone far-reaching changes since the 2008 Global Crisis. This column casts those changes in terms of shifts in the way financial intermediaries manage their balance sheets, and also discusses the regulatory reform agenda and reviews the impact of regulations on market liquidity and credit availability. The current evidence suggests that the financial system has become safer, at limited unintended cost.

Laurence Kotlikoff, 28 November 2018

The general consensus on what caused the Great Recession can be summed up as “bad banks full of bad bankers did bad things”. This column argues, however, that this narrative doesn’t fit the facts. And worse, it diverts attention from the real problem, which was regular use of a bad banking system – a banking system built to fail.

Daniel Calvo, Juan Carlos Crisanto, Stefan Hohl, 23 November 2018

A well designed financial supervisory architecture is essential for the effective functioning of any financial system. Using a survey of 82 jurisdictions, this column describes the state of financial supervisory models around the world and highlights the key institutional changes after the Global Crisis. It finds that the prevailing financial supervisory model continues to be sectoral, but that there have been incremental but important changes within existing models. Central banks have acquired more financial oversight responsibilities after the Global Crisis, and many jurisdictions have enhanced or are in the process of enhancing their consumer/investor protection supervision.

Pierluigi Bologna, Arianna Miglietta, Anatoli Segura, 29 October 2018

Proponents of contingent convertible bonds, or CoCos, argue that they are effective instruments for bank recapitalisation. Sceptics argue that they introduce too much complexity, with potentially destabilising consequences. This column addresses this dispute empirically, using the dynamics of the CoCo market in 2016. The CoCo market at the time exhibited adverse dynamics that can’t be explained by banks’ fundamentals. Though some of this instability may have been transitory, the findings imply that the market should be monitored as it develops.

Nauro Campos, Paul De Grauwe, Yuemei Ji, 10 October 2018

The tragedy of structural reforms is that they have been captured by policymakers. This column argues that the incessant repetition of the ‘must-reform’ mantra as a solution to the crisis has discouraged academic economists from embracing it as the important research topic it clearly is, and attempts to address the lack of adequate knowledge which makes the implementation of reforms more difficult and limits their effectiveness. 

Lucia Alessi, Peter Benczur, Francesca Campolongo, Jessica Cariboni, Anna Rita Manca, Balint Menyhert, Andrea Pagano, 26 September 2018

Over recent decades, scholars and policymakers have been exploring how to make economies more resilient to potential shocks. This column investigates which EU members showed resilience during the Global Crisis and attempts to identify characteristics associated with resilience. The results reveal a lot of heterogeneity amongst countries, and those that are more resilient in the short run are not necessarily those with superior recoveries down the line. Further analyses show that social expenditures, political stability, and competitive wages are important for impact, medium-run, and ‘bounce forward’ resilience, respectively. 

Diane Coyle, 25 September 2018

David Bell, David Blanchflower, 24 September 2018

The most widely available measure of underemployment is the share of involuntary part-time workers in total employment. This column argues that this does not fully capture the extent of worker dissatisfaction with currently contracted hours. An underemployment index measuring how many extra or fewer hours individuals would like to work suggests that the US and the UK are a long way from full employment, and that policymakers should not be focused on the unemployment rate in the years after a recession, but rather on the underemployment rate.  

Ester Faia, Sébastien Laffitte, Gianmarco Ottaviano, 20 September 2018

There is a general consensus that lax monetary policy and banking globalisation were two critical factors behind the Global Crisis. This column explores how banks’ decisions to enter foreign markets impacted their individual and systemic risk. Results from a sample of European banks suggest that banks’ foreign expansions decreased risk from both an individual and systemic viewpoint. The findings cast doubt on the idea that banking globalisation was one of the culprits behind the crisis.

Eugenio Cerutti, Stijn Claessens, Luc Laeven, 18 September 2018

The Global Crisis was a catalyst for the adoption of macroprudential policies around the world. Using newly updated data, this column examines the adoption of macroprudential policy instruments from 2000 to 2017. Since 2015, advanced economies have on average been using more instruments than emerging economies and low-income countries. While some instruments seem to be effective, it remains to be seen whether this suite of policies can deliver overall financial stability.

Simon Wren-Lewis, 17 September 2018

José De Gregorio, Barry Eichengreen, Takatoshi Ito, Charles Wyplosz, 11 September 2018

Twenty years ago, ICMB and CEPR published the first Geneva Report on the World Economy. Over these last two decades, the world of international finance has changed and so too has the IMF. This column introduces the latest report, in which the same team of authors highlight seven key developments affecting the monetary and financial environment and their implications for the Fund. 

Marcel Fratzscher, Christoph Grosse Steffen, Malte Rieth, 17 August 2018

Does inflation targeting help absorb large shocks? This column shows that it implies higher output growth and lower inflation when countries are hit by natural disasters. Hard targeting works in these cases; soft targeting does not. This has impacts for how we evaluate the success of inflation targeting during the global crisis, but also for the debate on flexible inflation targeting.

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