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. 

Helios Herrera, Max Konradt, Guillermo Ordoñez, Christoph Trebesch, 06 November 2020

The Covid-19 pandemic has had major political consequences. The balancing act of curbing the spread of the virus and re-opening the economy has been a particularly high-profile challenge for policymakers in recent months. This column explore the political costs of (mis-)managing the pandemic. The findings suggest that governments are punished in terms of political approval when Covid-19 infections accelerate, particularly in the absence of effective lockdown measures. Economic indicators, in contrast, do not appear to be strong predictor of political approval rates during this crisis. 

Mark Schankerman, Florian Schuett, 06 November 2020

In the last years, there has been substantial pushback against the patent system. Critics claim that patent rights are becoming an impediment to innovation, and an instrument to extract rents through patent litigation. This column develops a framework to quantitatively assess the effectiveness of the current US patent system and the welfare impact of reforms. It finds that the current system generates positive social value, and that the recent introduction of the Patent Trial and Appeal Board increased welfare. Intensifying patent office examination and imposing antitrust limits on patent licensing agreements would yield additional welfare gains.

Johannes Kunz, Carol Propper, 05 November 2020

The COVID-19 pandemic has spread quickly and extensively around the globe and left behind many fatalities. This column reports on research which examines the association between county-level death rates and the quality of hospital care residents of those counties had access to in the first five months of the pandemic in the US. It finds that death rates were lower in counties where quality of hospital care, particularly for respiratory disease, was higher. But counties with high shares of minority populations did not appear to benefit from higher hospital quality.

Alex Rees-Jones, John D'Attoma, Amedeo Piolatto, Luca Salvadori, 04 November 2020

While few groups have weathered the Covid-19 crisis unscathed, recent evidence suggests that the damage has been especially extreme among the economically vulnerable. This column evaluates changing attitudes towards welfare spending as a result of the pandemic. The findings suggest that people living in areas most severely hit by the crisis are increasingly supportive of long-term reforms to the welfare system. Despite having access to relatively widespread welfare spending, European citizens are dissatisfied with the safety net systems currently in place. 

Jesse Bruhn, Scott A. Imberman, Marcus A. Winters, 01 November 2020

Charter schools in the US – publicly funded but independently operated schools of choice – are often criticised for competing with and harming the quality of surrounding traditional public schools. This column examines Massachusetts’s expansive and effective charter-school sector for the relationship between teacher quality and mobility. Charter schools retain fewer teachers compared to traditional public schools and the best teachers often move to the traditional public-school system. Charter schools may benefit traditional public schools by providing an alternative pathway for unlicensed teachers to enter the labour force and sorting those who are successful in to traditional public schools. 

Mark Colas, Sebastian Findeisen, Dominik Sachs, 31 October 2020

Need-based financial aid helps underprivileged students in the US attend university. This column combines theoretical and empirical analyses to determine the optimal level of that aid and finds that current aid packages in the US are significantly less need-based than they should be. Not only does need-based financial aid help to reduce inequality, it is also an investment in future tax revenue, making it an optimal subsidy from an efficiency standpoint. In this case, equity and efficiency go hand in hand.

Ozlem Akin, Christian Fons-Rosen, José-Luis Peydró, 29 October 2020

There are widespread concerns about potentially excessive connections between the financial sector and political institutions. Less is known about the intensity of information flows between the public and private sector. This column examines insider trading surrounding the largest bank bailout in history, the 2008 US Troubled Asset Relief Program. In politically connected banks, insider buying during the pre-TARP period is associated with increases in abnormal returns around bank-specific TARP announcements. Information transmission seems to be a third pillar of the mutually beneficial relationship between finance and politics, possibly allowing bankers to use their political connections for personal gain.

Alexander Chudik, Kamiar Mohaddes, M. Hashem Pesaran, Mehdi Raissi, Alessandro Rebucci, 19 October 2020

The Covid-19 pandemic is unprecedented in its global reach and impact, posing formidable challenges to policymakers and to the empirical analysis of its direct and indirect effects within the interconnected global economy. This column uses a ‘threshold-augmented multi-country econometric model’ to help quantify the impact of the Covid-19 shock along several dimensions. The results of the analysis show that the global recession will be long lasting, with no country escaping its impact regardless of their mitigation strategy. These findings call for a coordinated multi-country policy response to the pandemic.

Marit Hinnosaar, Elaine Liu, 18 October 2020

Alcohol is one of the leading killers among substances, but little is known how various factors interact to affect individual alcohol consumption. This column explores how much the environment –, including supply conditions, alcohol regulation, taxes, and peers – drives alcohol consumption, by analysing changes in alcohol purchases when US consumers move from one state to another. The current environment explains about two-thirds of the differences in alcohol purchases, with consumers’ alcohol purchases converging sharply toward the average purchase level in their destination state right after moving.

Emine Boz, Camila Casas, Georgios Georgiadis, Gita Gopinath, Helena Le Mezo , Arnaud Mehl, Tra Nguyen, 09 October 2020

Most global trade transactions are invoiced in just a few currencies, regardless of the countries involved in the transaction. This column presents a new dataset that offers a comprehensive and up-to-date understanding of trade invoicing patterns within the major currencies. It finds that vehicle currency use has been on the rise, with dollar invoicing increasing over time despite the decline in the share of global trade accounted for by the US, and euro invoicing also rising among certain countries (typically at the expense of the dollar). 

Ricardo Caballero, Alp Simsek, 05 October 2020

While the Fed’s massive policy response to the Covid-19 shock was successful in reversing the financial meltdown, it did not prevent a dramatic collapse in the real economy. This column argues that the patterns observed are consistent with optimal monetary policy once the subtleties of the relationship between monetary policy, the stock market, and the economy are considered.

Gerdien Meijerink, Bram Hendriks, Peter A.G. van Bergeijk, 02 October 2020

The outbreak of the Covid-19 pandemic led to a 14% dive in world trade by April 2020. Using the CPB’s World Trade Monitor and a Bayesian VAR model, this column compares the recent contraction, and partial recovery, to the 2008/2009 Global Crisis and the Great Depression. The current trade recession appears to have a sharper ‘V-shape’, with a stronger collapse but a quicker recovery than the previous crises.

Gordon Liao, Tony Zhang, 01 October 2020

Institutional investors and borrowers often hedge a sizeable portion of their currency mismatches. This column examines the role that this currency hedging of foreign assets and liabilities plays in determining exchange rates. It shows that countries’ hedging demands from their external imbalances can explain forward and spot exchange rate dynamics during the COVID-induced financial turmoil in March 2020, as well as their usage of the Federal Reserve central bank liquidity swap lines.

Olivier Coibion, Yuriy Gorodnichenko, Edward S. Knotek II, Raphael Schoenle, 30 September 2020

On 27 August 2020, the Federal Reserve announced the adoption of a new strategy of ‘average inflation targeting’, which is to replace traditional inflation targeting. This column uses a daily survey of US households to study how this announcement affected inflation expectations. It finds a small uptick in the share of households reporting to have heard news about monetary policy on the day of the announcement, but hearing about the news did not appear to affect their expectations. Even providing households with information on average inflation targeting directly did not change expectations relative to households who received information on traditional inflation targeting.

Janine Aron, John Muellbauer, 29 September 2020

The US has 4% of the world’s population but 21% of the global COVID-19-attributed infections and deaths. This column shows that when comparing excess mortality rates, a more robust way of reporting on pandemic deaths, Europe’s cumulative excess mortality rate from March to July is 28% lower than the US rate, contradicting the Trump administration’s claim that Europe’s rate is 33% higher. The US Northeast – the region most comparable with individual European countries – has experienced substantially worse excess mortality than Europe’s worst-affected countries. Had the US kept its excess mortality rate down to the level in Europe, around 57,800 American lives would have been saved. 

Jeffrey Clemens, Stan Veuger, 28 September 2020

The COVID-19 shock has significant negative consequences for the finances of US state and local governments, especially since they are bound by balanced-budget requirements. Estimates of (expected) revenue shortfalls are therefore an important input in the allocation of federal funds to offset the pandemic’s effects on state and local government revenues. This column uses Congressional Budget Office projections of consumption and personal income to forecast sales and income tax bases and revenue for all of the states. Based on May and July projections, it estimates a total shortfall of $106 billion and $105 billion, respectively.

Ufuk Akcigit, Sina T. Ates, Josh Lerner, Richard Townsend, Yulia Zhestkova, 24 September 2020

The US military community has highlighted the potential security threat posed by foreign venture investments in Silicon Valley, particularly from Chinese stakeholders. This column presents a theoretical and empirical analysis of the relationship between venture capital and national security, focusing on the ability of overseas firms to gain a domestic technological advantage through investing in the US tech sector. The growing importance of this the technology sector, as well as the national security issues at stake, mean that understanding the correlations is a vital avenue of future research.

Jose Maria Barrero, Nicholas Bloom, Steven Davis, 23 September 2020

The COVID-19 pandemic triggered a sudden, massive shift around the world to working from home. While there is great concern how this will affect inequality and how the economy will adjust, the shift has also saved billions of hours of commuting time in the US alone. Drawing on original surveys, this column estimates that the shift to working from home lowers commuting time among Americans by more than 60 million hours per workday. Americans devote about a third of the time savings to their primary jobs and about 60% to other work activities, including household chores and childcare. The allocation of time savings differs substantially by education group and between persons with and without children at home.


CEPR Policy Research