Are declarations of victory against the global crisis premature? This column argues that “graduation” – the emergence from recurrent crisis bouts – is a long and painful process which neither developed nor developing countries look close to completing. Two centuries of evidence suggests that most countries need 50 years before the chances of further crises subside.
More than one billion adults across the globe are overweight, and at least 300 million are clinically obese. This column argues that the obesity epidemic in the US has been creeping up throughout the twentieth century, much earlier than the official account acknowledges. Current US standards thereby mislead many overweight and obese youth into believing that their weight is normal when it is not.
The US may be near a liquidity trap. This column argues that the ineffectiveness of monetary policy can be turned on its head by using money creation to finance fiscal policy stimulus – such as a large but temporary cut in sales taxes. To avoid future problems, the Treasury could commit to transfer resources back to the Fed when the economy is back to full employment. This would be a helicopter drop with a drainage contingency.
Does it pay to be corrupt? This column presents evidence from 22 emerging economies in Europe and the former Soviet Union on the effects of corruption on firm productivity. It finds that in a highly corrupt country, bribing officials actually has a negative effect on productivity, whereas in countries with strong institutions, it can open doors that competitors dare not touch.
The debate over the cause of the US housing boom and bust is far from concluded. This column questions the explanation that low interest rates were a critical factor, arguing that it sits uneasily alongside theories of household behaviour and historical evidence. With the causes remaining uncertain, the authors call for more research in this area.
Gianmarco Ottaviano of Bocconi University talks to Viv Davies about 'The Global Operations of European Firms', a report that analyses data on 15,000 firms in seven countries to show that firm size, productivity, skill intensity and the ability to innovate are associated with better export performance, foreign direct investment and outsourcing. He argues that firms can improve their competitiveness within the European single market, but competing effectively in the future will require more than just exporting to neighbouring EU countries. The interview was recorded in Rome on 19 June 2010.
The great trade collapse that accompanied the global crisis was historically severe. This column presents evidence from several countries suggesting that the great trade collapse was more concentrated along the intensive margin – the reduction in the value of goods already being traded – providing hope that trade may recover sooner than feared.
Why have China and India been able to grow so quickly? This column argues that while the industrial policies pursued by both countries up until the 1980s led to gross mistakes and inefficiencies, China and India would not be where they are now without them. Their export baskets are far more sophisticated and diversified than expected given their income per capita.
The subprime crisis and subsequent global crisis have brought bank finances firmly to public attention, with many calling for stronger regulation. This column argues that the subprime crisis offered a “wake-up call” for banks, prompting them to screen and monitor their corporate borrowers more carefully without the need for more regulation. This may have contributed to the subsequent reduction in corporate lending.
Promoting gender equality is a Millennium Development Goal. This column explores the effects of trade liberalisation in Mexico during the 1990s on the country’s gender gap. It finds that trade benefitted sectors of the economy that employ more women, such as textiles and clothing, thereby helping to raise women’s earnings and relative social status.
Governments faced with rising costs and growing demand are constantly searching for methods of delivering higher productivity in healthcare. This column suggests that the introduction of competition among UK hospitals – yet with a fixed price – has lowered death rates without a commensurate increase in costs.
Is concern for the environment a luxury good? This column presents data from Google searches for the words “unemployment” and “global warming” by US users. It argues that recessions increase concerns about unemployment at the expense of people’s interest in climate change – in some cases leading them to deny its existence.
The extent of the damage from the global crisis has forced policymakers to rethink how they regulate finance. This column first examines the long-term impact of stronger capital and liquidity requirements and then estimates the transitional economic impact as the new standards are phased in. It argues that, while such reforms may come at a short-term cost, the benefits of a stronger and healthier financial system will be around for years to come.
Viral Acharya talks to Viv Davies about the Dodd-Frank Act and his recent work on capital requirements, market-based measures of systemic risk and stress tests. He highlights the new NYU Stern Systemic Risk Rankings of US financial institutions, which use the Marginal Expected Shortfall (MES) as its basis. Acharya discusses the shortcomings of the Basel III proposals and compares the recent European stress tests with those undertaken in the US. He highlights the importance of international coordination in the areas of derivatives, and agrees that financial reform compliance will require a cultural shift in the banking system.
In the World Cup, countries rely not on the average quality of their footballers, but on the quality of their best footballers. Could superstars also be crucial in economic competition? This column reveals that each year Mexico produces fewer than 6,000 world class mathematicians at age 15. If superstars do play any role in economic performance then this is particularly problematic, especially since the dominant policy attention is focused elsewhere.
Rising unemployment has forced policymakers to look for ways to get the unemployed back to work – to raise the “reemployment” rate of the unemployed. This column provides new evidence from the Netherlands suggesting that the stick of benefit sanctions is much more effective than the carrot of reemployment bonuses.
In Mel Brooks’ hit film and Broadway musical The Producers, those charged with making their musical a success instead try to profit from making it a spectacular failure. This column argues that some bankers may have been playing the same game in the run up to the global crisis. If so, just as in The Producers, the perpetrators should be heading to jail.
Fiscal stance is this summer’s hot topic. This column highlights that significant revisions have been made to output estimates for the 2008-2011 period without being made clear and discussed in public, while the economic foundations for applying such revisions are questionable. The debate should take the impact of these revisions into account.
The fallout from global crisis has left many calling for economy-wide, macro-prudential policies, such as taxes on capital flows and capital controls. This column argues that the case for such measures is ambiguous at best – the excessive borrowing on which they are predicated is not a general and robust feature of financially developed and integrated economies.
How can monetary policy overcome the zero lower bound on interest rates? This column explores the possibility of negative nominal interest rates, arguing that, for it to work, all reserve nations must agree to protect against using foreign currencies as an alternative means of exchange.
The global crisis has helped promote the G20 from supporting role to one of the leading forums on the world stage. This column argues that the G20 presents a unique opportunity for its medium-sized members to influence the global economic agenda – but only if they base their short-term actions on a long-term vision.
Xavier Freixas talks to Viv Davies about the outcome of the recent stress tests undertaken by European banks. Freixas explains his view of the purpose of the tests and why he considers they were successful in spite of criticisms regarding their lack of robustness. He discusses the impact of the tests on the Spanish cajas and the Spanish banking system, and comments on the surge in investment in the activities of European banks following the results of the tests.
Some argue that the global competition for talented workers leads to a “brain drain” robbing poor countries of their brightest sparks and stifling development. Others suggest that the local economy can benefit through trade, investment, and knowledge transfer. This column argues that for developing countries with the largest high-skilled migration, neither is spot on – by far the biggest impact is on the migrants themselves.
For many, corruption and political cronyism are seen as an inevitable part of Greek politics. This column argues that the same could have been said in the 1970s about Hong Kong, now a beacon of low corruption. Hong Kong managed this turnaround by appointing a non-elected governor accountable to the UK government. Greece could achieve the same by calling on the EU and start counting the benefits.
With the advanced economies at a critical juncture, some economists are urging more fiscal stimulus while others argue that raising debt levels will stunt growth. This column presents the Reinhart-Rogoff findings on the relationship between debt and growth based on data from 44 countries over 200 years with a focus on the debt-growth link during high-debt episodes.
Could the car industry in developing countries start to produce vehicles that can compete domestically – perhaps even globally? This column argues that while the prospects for the automotive sector are still less promising than for other industries, as the markets for motor vehicles shift to the developing world and production inevitably follows, more development and design work will shift as well.
Bank bailouts have been controversial from the outset, with some commentators saying that they reward banks for making risky loans. This column investigates the idea of an asset buyback in which a special purpose vehicle buys bad loans from banks' balance sheets. It argues that these buybacks could be structured to avoid windfall gains.
If the base rate rises, all things being equal, the exchange rate is expected to rise and bond prices to fall. This column argues that, during a financial crisis, such relationships between asset classes go haywire. When this happens, it says governments (including central banks) must provide strong signals to the market and make sure that they pick up the right signals from the market themselves.
The spectre of sovereign default looming over the world economy represents a major threat to economic stability. This column argues that, even without a fully-fledged debt crisis, the deterioration of public finances in major countries could trigger an increase in long-term interest rates and jeopardise the recovery.
Raghuram Rajan of the University of Chicago talks to Romesh Vaitilingam about his book 'Fault Lines', in which he outlines the deep systemic problems in the world economy that threaten further financial crises – high US inequality, patched over by easy credit; excessive stimulus to sustain job creation in times of downturn; and the choices of Germany, Japan and China to focus on export-led growth rather than domestic consumption. The interview was recorded in London in July 2010.
Obesity and teenage sex have become social and public health issues in developed countries. This column looks at the effects of being overweight on attitudes to sex among teenage girls in the US. While obesity is associated with less vaginal intercourse, overweight teenage girls are at least 15% more likely to have had anal sex, with a high chance of sexually transmitted disease.
Can increasing US exports create US jobs? Manufactures dominate US exports, but US manufacturing employment is declining. This column suggests that increased US exports are unlikely to lead to dramatic manufacturing employment gains, but employment in related services sectors may improve.
Trade in natural resources accounts for a growing share of world trade and a growing share of policymakers’ attention. Given the economic, environmental, and political implications of natural resources, this column asks how to design rules that can promote mutual gains from resources trade. It provides recommendations for export policy, conservation policy, and domestic policy.
The debate over fiscal policy has reached a fork in the road. One way leads to maintaining or increasing the fiscal stimulus. This column argues that policymakers should take the other path. This would mean phasing out government expenditure while phasing in social protection programmes at the risk of a double-dip recession but potentially resulting in a more vibrant economy.
The competitive paradigm predicts equivalent wages for equivalent workers, but significant gender gaps persist in many labor markets. This column analyses the gap in earnings between Spanish men and women, focusing on performance-related pay. It shows a strikingly large gap in pay and suggests that employer beliefs about unbalanced household tasks and outside options generate “a marriage premium” for males and a “marriage penalty” for women.
The global crisis has left many calling for early warning systems to prompt authorities into action before it’s too late. This column argues that such a system is restricted by our understanding of what caused the crisis in the first place. Indeed, it shows that popular explanations for the current crisis have little to no ability to predict past crises.
Policymakers care deeply about exports, which have accompanied most successful development stories in the last few decades. This column provides evidence from Mexico suggesting that uncertainty and information asymmetries are significant barriers to entry for exporters and should be the focus of policy interventions.
Global imbalances are firmly back on the policy agenda. This column examines evidence from past imbalances that suggests that the current-account reversals can be sizeable and the resulting disruption to capital flows could pose risks for the global recovery.
- Fiscal consolidation: At what speed?Blanchard, Leigh
- Escaping liquidity traps: Lessons from the UK’s 1930s escapeCrafts
- The lessons of the North Atlantic crisis for economic theory and policyStiglitz
- Helicopter money as a policy optionReichlin, Turner, Woodford
- The case for 4% inflationBall
- A tale of two depressions: What do the new data tell us? February 2010 updateEichengreen, O’Rourke
- Educated in America: College graduates and high school dropoutsHeckman, LaFontaine
- Eurozone breakup would trigger the mother of all financial crisesEichengreen
- Debt, deleveraging, and the liquidity trap: A new modelKrugman
- Panic-driven austerity in the Eurozone and its implicationsDe Grauwe, Ji
Reichlin, Baldwin, 14 April 2013
Reichlin, Turner, Woodford
CEPR Policy Research
- The "Greatest" Carry Trade Ever? Understanding Eurozone Bank RisksAcharya, Steffen
- Political Credit Cycles: The Case of the Euro ZoneFernández-Villaverde, Garicano, Santos
- Winning by Losing: Incentive Incompatibility in Multiple QualifiersDagaev, Sonin
- Income and schoolingBrückner, Gradstein
- Monetary Policy and Rational Asset Price BubblesGalí
- How the EZ crisis is permanently changing EU institutionsMicossi
- WTO 2.0: Global governance of supply-chain tradeBaldwin
- Is US economic growth over? Faltering innovation confronts the six headwindsGordon
- The economic crisis: How to stimulate economies without increasing public debtWood
- Austerity: Too Much of a Good Thing?Corsetti