Stefano Federico, Fadi Hassan, Veronica Rappoport, 25 June 2020

In a period where the backlash against trade and globalisation is at historical high point, it is crucial to understand the frictions that prevent a full realisation of the gains from trade. This column takes evidence from Italy and contributes to the debate by identifying a novel channel: the endogenous funding constraint of banks whose loan portfolios are affected negatively by the liberalisation. There are spillovers between ‘losers’ and ‘winners’ from trade that operate through banks, which hinder the reallocation of resources towards firms that should actually expand after the liberalisation.

Robert Gilhooly, Carolina Martinez, Abigail Watt, 22 June 2020

China has implemented a wide range of measures to support the economy through the ongoing coronavirus shock. This column examines China’s policy response, and suggests that the recent loosening in financial conditions should support activity over the next six to nine months, but it will only be at best half that seen in 2016 and a third of that after the Global Crisis given the relative change in financial conditions thus far. Moreover, the policy levers are at best only 40% of that deployed during the Global Crisis. This contrasts with the approach of many other countries, which have reacted more aggressively to the coronavirus shock. 

Yiping Huang, 17 June 2020

Although coronavirus infection rates have dropped considerably in China and businesses are starting to return to something resembling normality, there is still a high state of alert and outbreaks are treated with an immediate and firm response.
Huang Yiping, recorded 21 May 2020 at CEPR / LSE IGA / SPP webinar on:
Recovering from COVID-19 – China and global value chains in the wake of the pandemic

Karlo Kauko, 22 May 2020

Many observers have had a sceptical attitude towards Chinese banks’ official disclosures of non-performing loans. A loan should be classified non-performing if the customer stops servicing the loan. Therefore, hidden problems in the loan portfolio would manifest themselves as a suspiciously low interest revenue. Using this simple idea, this column sheds light on the likely distribution of hidden non-performing loans in Chinese banks. It finds that loan quality problems became more commonplace in 2016. Surprisingly, hidden NPLs seem more common in strongly capitalised banks and large banks, but also in banks that rely on interbank funding.

Bernard Hoekman, Douglas Nelson, 08 May 2020

Prior to the re-emergence of tariff nationalism as espoused by the Trump administration, subsidies were becoming a central source of trade tensions between major economies. The prospect of trade conflicts associated with the use of such instruments to combat climate change was increasing. Policy responses to the COVID-19 pandemic have led to a massive increase in subsidisation of firms in many countries. This column argues for a revisit of current approaches to addressing subsidy conflicts. The need for cooperation between the major economies to manage the international competitive spillovers of subsidies was evident pre-COVID-19. It has now become much more urgent.

Sebastian Horn, Carmen Reinhart, Christoph Trebesch, 04 May 2020

COVID-19 is wreaking economic havoc, and its most severe consequences are likely to be felt in the developing world. Recession, depressed commodity prices, collapsing cross-border trade, and a flight to safety in financial markets have set the stage for a replay of the 1930s and 1980s debt crises. This column presents insights from a comprehensive new dataset on China’s overseas lending and shows that developing countries are much more indebted to China than previously known. Any effort to provide meaningful debt relief to the most vulnerable countries must encompass the debts owed to China.

Yi Huang, Chen Lin, Pengfei Wang, Zhiwei Xu, 23 March 2020

With the COVID-19 outbreak having officially become a pandemic, it is essential to consider not just how to prevent further public health crises but also economic and financial crises. This column suggests that in both cases, recent lessons from China are instructive. China enacted aggressive public health policies that appear to have been effective, at least in the short term. But the measures taken to stem the public health crisis may still lead to a domestic economic meltdown that could infect international trade.

Alejandro Cuñat, Robert Zymek, 17 February 2020

Most countries exhibit large variation in bilateral trade balances across their trade partners. This column argues that it is possible to use gravity trade models to describe the sources of this variation with greater clarity, but that a large portion of the variation still remains poorly understood. It also shows that tariffs imposed during the US-China trade war will reduce the US-China trade deficit in the long run, but only by worsening the US trade balance with other trade partners almost one-for-one.

Panle Jia Barwick, Shanjun Li, Liguo Lin, Eric Zou, 12 February 2020

During 2013–2014, China launched a nationwide, real-time air quality monitoring and disclosure programme which substantially expanded public access to pollution information. This column analyses the impact of the programme and finds that it triggered a cascade of changes in household behaviour, prompting people to find out more online about pollution-related topics, adjust their day-to-day consumption to avoid exposure to pollution, and exhibit a higher willingness to pay for housing in less-polluted areas. The programme’s estimated annual health benefits far outweigh the combined costs of the programme and associated pollution-avoidance behaviours.

Peter Egger, Jiaqing Zhu, 09 January 2020

The US and China have been exchanging threats and imposing tariffs in a ‘trade war’ since early 2018. Sound statistical and holistic economic analysis of the trade dispute’s consequences is difficult due to data limitations. This column scrutinises global stock market responses to assess the effects of the trade war and finds that, on average, the US and Chinese tariffs have directly hurt targeted firms/sectors abroad as intended, but they have also hurt firms at home. It also reveals unintended effects on third parties, mediated by global value chain interdependencies.

Joseph Stiglitz, 27 November 2019

Joe Stiglitz offers his thoughts on economic growth in Africa, inequality in China, and the other key economic questions of our time.

Menzie Chinn, Hiro Ito, 21 November 2019

Global imbalances have reappeared, somewhat transformed, and relocated. Using data from developing and industrialised countries covering 1972-2016, this column shows that fiscal factors, rather than savings glut variables, have accounted for a noticeable share of the recent variation in imbalances, including in the US and Germany. The contribution of demographic factors is large for industrialised countries but not for emerging markets. Net official flows shape global imbalances in both developing and industrialised countries. 

Yuqing Xing, 11 November 2019

In order to pursue ‘fair trade’, the Trump administration has imposed a punitive 25% tariff on $250 billion’s worth of Chinese goods. However, conventional trade statistics greatly exaggerate the US trade deficit with China. This column uses the iPhone as an example to demonstrate how the trade deficit is inflated and why value-added should be used to assess the bilateral trade balance. If multinational enterprises, including Apple, shift part of their value chains out of China, China may no longer play a central role in global value chains targeting the US market. Depreciation of the yuan will be insufficient to counter the effect. 

Philippe Aghion, Sergei Guriev, Kangchul Jo, 07 November 2019

Moving from low- to high-income status implies that countries escape the middle-income trap. This implies institutional reform to create innovation-based growth. The column uses firm-level data to show how the Korean government's chaebol reforms in the late 1990s transformed the economy from an investment-based to an innovation-based model. There are lessons here for China.

Willem Thorbecke, 06 November 2019

As the trade surpluses of East Asian countries have continued to exist in regional value chains despite the US-China trade war, one possible tool such economies could employ are currency appreciations. This column shows how exchange rates in upstream countries affect China’s exports. No single economy wants to appreciate its currency against the US dollar for fear of losing competitiveness, but a concerted effort to prioritise regional currencies could benefit the set of countries as a whole.

Xavier Jaravel, Erick Sager, 16 October 2019

International trade creates both winners and losers. Using comprehensive price data, this column estimates the US price effects of the China shock from 2000 to 2007. It finds that US consumers benefited from large price declines in product categories in which imports from China increased, as increased trade with China eroded the market power of US producers. The positive impact of the China shock on the purchasing power of US consumers is large in comparison to its negative impact on US jobs.

Li Yang, Filip Novokmet, Branko Milanovic, 09 October 2019

The historically unprecedented economic and social transformation in China over the past four decades has seen urban areas becoming much richer, but also much more unequal. This column analyses changes in the Chinese urban elite. It finds that, compared to the 1980s, the elite today consists mainly of professionals, self-employed, and smaller and larger business people, they are much better educated, and they receive a much greater share of total urban income. This is reflected also in the composition of the Communist Party of China.

Stefania Garetto, Lindsay Oldenski, Natalia Ramondo, 08 October 2019

Multinational enterprises play an important role in coordinating production around the globe. This column presents a dynamic quantitative model of multinational enterprise expansion that can be used to analyse the effects of policies that affect the cost of the operations of such firms. It uses this model to estaimte the impact of potential implementations of Brexit.

Axel Dreher, Andreas Fuchs, Roland Hodler, Bradley Parks, Paul Raschky, Michael Tierney, 07 October 2019

Chinese development projects have the potential to improve the lives of millions of people, but political capture of its development finance by politicians may undermine its effectiveness. This column examines local development outcomes across 47 African countries and the effects of financial support from China between 2001 and 2012. The results not only show that Chinese aid registers positive effects on economic development at the district-level and province-level, but also that political bias in the subnational distribution of Chinese aid does not substantially undermine local development outcomes.

Scott Baker, Nicholas Bloom, Steven Davis, 17 September 2019

Tariff threats, hikes, and retaliations have become a major source of economic uncertainty and stock market volatility. This column draws on three initiatives to demonstrate that recent rise in trade policy uncertainty, driven by the US withdrawal from the Trans-Pacific Partnership, tariff hikes on US steel and aluminium imports, ongoing Brexit uncertainty, and escalating US-China trade tensions, is extraordinary by several metrics. 


CEPR Policy Research