Culture can determine long-run growthYuriy Gorodnichenko, Gérard Roland, 21 September 2010Does culture affect long-run growth? This column argues that countries with a more individualist culture have enjoyed higher long-run growth than countries with a more collectivist culture. Individualist culture attaches social status rewards to personal achievements and thus provides not only monetary incentives for innovation but also social status rewards. Inflation when the economy is in the dumpsAndré Meier, 21 September 2010What happens to inflation during a downturn? This column documents the behaviour of inflation during 25 episodes of persistent large output gaps in 14 advanced economies over the last 40 years. It finds that such episodes bring about significant disinflation, although inflation tends to bottom out at low positive rates. Recent developments in advanced economies appear consistent with this disinflationary effect. Did France cause the Great Depression?Douglas Irwin, 20 September 2010A large body of research has linked the gold standard to the severity of the Great Depression. This column argues that while economic historians have focused on the role of tightened US monetary policy, not enough attention has been given to the role of France, whose share of world gold reserves soared from 7% in 1926 to 27% in 1932. It suggests that France’s policies directly account for about half of the 30% deflation experienced in 1930 and 1931. Taste differences, home markets, and the gains from trade: Did Krugman praise Linder, or bury him?Raphael Auer, 19 September 2010Do differences in tastes impede gains from trade? This column says that that may be the case only in special circumstances. In fact, the effects of trade liberalization may be entirely unaffected by the distribution of foreign tastes and coincide with those of a representative agent approach. Competition and stability in bankingXavier Vives, 18 September 2010With the recent wave of bank bailouts and mergers, competition in the sector has surely been affected. This column introduces a new Policy Insight arguing that a trade-off between regulation and competition in the banking sector, while complex, does exist. The optimal policy requires coordination between regulation and competition policy depending on the level of competition in the market. Tolls instead of traffic jamsHans-Werner Sinn, 17 September 2010No one likes sitting in a traffic jam, but what can be done about them? This column says the time has come for general road tolls on all roads across all of Europe. Automatic stabilisers and the global crisisMathias Dolls, Clemens Fuest, Andreas Peichl, 17 September 2010While debate rages over the appropriate size and timing of fiscal expansions, this column points out that much less attention is devoted to role of the automatic stabilisers in the tax and transfer system. It compares these stabilisers in Europe and the US, finding that social transfers play a key role in the stabilisation of disposable incomes and consumer demand.
A transformation economy: shaping the future of EU trade policy
David O'Sullivan, 17 September 2010
David O’Sullivan, Director General for Trade at the European Commission, talks to Viv Davies about the issues and challenges in setting the direction for future EU trade policy. As a contribution to the VoxEU debate on "The future of EU trade policy", O’Sullivan discusses the EU’s responsibility within the world trading system, trade governance and the WTO, the role of reciprocity, the BRICs and the importance of successfully concluding the Doha Development Agenda; he also comments on the issue of ‘multilateralising regionalism’. The interview was recorded on 15 September 2010. Managed exports and the recovery of world trade: The seventh Global Trade Alert reportSimon J Evenett, 16 September 2010Our understanding of the recent recovery in world trade would be incomplete without a consideration of the export inducements put in place during the past 12 to 18 months by major trading nations. This column summarises the findings of the seventh report of the Global Trade Alert, including a regional focus on Latin America. Fiscal policy and global imbalancesS. M. Ali Abbas, Jacques Bouhga-Hagbe, Antonio Fatás , Paolo Mauro, Ricardo Cicchelli Velloso, 16 September 2010What impact will fiscal policy have on current-account imbalances in the years to come? Using data from a large and diverse panel of countries, this column finds that a strengthening in the fiscal balance by 1 percentage point of GDP is, on average, associated with a current-account improvement of 0.2-0.3 percentage points of GDP. The shortcomings of using states for federal macroeconomic fiscal policyRobert P Inman, 15 September 2010What can we learn from US President Obama’s fiscal stimulus? This column argues that channelling the stimulus package through state governments exposed it to agency costs, free-riding problem, and political expediency. As a result, the stimulus has failed to meet its objectives at the state level. The lesson is that fiscal stimulus should be conducted centrally. Do free-trade agreements increase protectionism towards non-members?Thomas Prusa, Robert Teh, 15 September 2010While countries rush to enact more and more free-trade agreements, not enough is known about their impact. This column presents evidence suggesting that free-trade agreements are more discriminatory than their preferential tariffs suggest. It finds a stark increase in contingent protection as free-trade agreements cause a 10%-30% increase in the number of antidumping disputes against non-member countries. The Empire strikes backAvinash Persaud, 14 September 2010The role of financial institutions in the global crisis has led to a consensus that financial regulation must change. This column argues that the banking lobby, far from depleted, has struck back with a vengeance. It has managed to postpone the much needed regulation for a time when the need for it will be forgotten. EU stress tests and sovereign debt exposuresAdrian Blundell-Wignall, Patrick Slovik, 14 September 2010Despite the encouraging results from the stress tests of the EU’s banking sector, market confidence in the financial system remains subdued. This column argues that while most of the sovereign debt held by EU banks is on their banking books, the EU stress test only considered their smaller trading book exposures. Market participants do not have the luxury of being so selective. The decade after the fall: Diminished expectations, double dips, and external shocksCarmen M. Reinhart, Vincent Reinhart, 13 September 2010Is the global economic recovery about to grind to a halt? This column provides evidence on economic performance in the decade after a macroeconomic crisis. It finds that growth is much slower and as well as several episodes of “double dips”. It adds that many of these economies experience plain “bad luck” that strikes at a time when the economy remains highly vulnerable. Foreign-currency loans in Eastern Europe: Borrower pull or bank push?Martin Brown, Karolin Kirschenmann, Steven Ongena, 13 September 2010Foreign-currency loans in Eastern Europe are seen as a major threat to financial stability. Why then are they so widespread? This column presents evidence from over 100,000 loans made by a Bulgarian bank between 2003 and 2007. It finds that one-third of foreign-currency loans were actually requested in local currency by the firm, suggesting that banks are pushing them. Improving the credibility of fiscal planning in EuropeRoel Beetsma, Massimo Giuliodori, Mark Walschot, Peter Wierts, 13 September 2010Europe’s fiscal crisis has called into question the fiscal credibility of some of its largest members. This column argues that some elements in the European Commission’s reform proposals may actually weaken accountability instead of strengthening it. Governments, central bankers, and banking supervision reforms: Does independence matter?Lucia Dalla Pellegrina, Donato Masciandaro, Rosaria Vega Pansini, 12 September 2010The global crisis has led policymakers in the EU and the US to broaden their central banks' mandates to include greater banking supervision. This column argues that this new responsibility should be seen as an evolution of the central bank specialisation as a monetary agent rather than a reversal of the specialisation trend. Climatopolis: How will climate change impact urbanites and their cities?Matthew E. Kahn, 11 September 2010Most scientists agree that climate change is underway or at least on the horizon. This column introduces the author's book 'Climatopolis: How Our Cities will Thrive in Our Hotter Future.' It outlines an optimism and an irony: Urban economic growth may have caused climate change, but through the free market, it will also help us to adapt to it. Is this your grandfather’s mortgage crisis? Lessons from the 1930sKenneth A. Snowden, 10 September 2010Was the subprime crisis inevitable? This column looks at how the last mortgage crisis in the 1930s shaped the policy landscape in the US, arguing that it eventually led to the emergence of private securitisation in the 1990s, a surge in homebuilding and homeownership, and a second great mortgage crisis that was just around the corner. A tale of two depressions: What do the new data tell us? February 2010 updateBarry Eichengreen, Kevin H. O’Rourke, 8 March 2010This column updates the original Vox columns by Barry Eichengreen and Kevin O’Rourke comparing today’s global crisis to the Great Depression. The three previous columns have shattered all Vox readership records with over 450,000 views. This latest edition covers up to February 2010 showing that, while there is cause for optimism, there is no room for complacency. Views 564795Educated in America: College graduates and high school dropoutsJames J. Heckman, Paul A. LaFontaine, 13 February 2008Official statistics for US high school graduation rates mask a growing educational divide. This column presents research showing that a record number of Americans are going to university – while an increasing number are dropping out of high school. This poses major social challenges for the United States. Views 130992Eurozone breakup would trigger the mother of all financial crisesBarry Eichengreen, 4 May 2010Originally posted 17 November 2007, this Vox column is more relevant than ever arguing that adopting the euro is effectively irreversible. Leaving would require lengthy preparations, which, given the anticipated devaluation, would trigger the mother of all financial crises. National households and firms would shift deposits to other Eurozone banks producing a system-wide bank run. Investors, trying to escape, would create a bond-market crisis. Here is what the train wreck would look like. Views 82003Subprime 'crisis': FAQs (revised & updated)Stephen Cecchetti, 15 August 2007A revised and updated version of the 13 August column on the basic how's and why's of what the Fed has been doing to calm financial markets. Views 76851Five decades of evidence on financial crisis and recession: How long? How deep?Stijn Claessens, M. Ayhan Kose, Marco E. Terrones, 7 October 2008The house and equity price busts on top of a credit crunch make this an unprecedented crisis for the modern US economy; its real economy effects are thus difficult to assess. This column provides insights based on evidence from 122 recessions in 21 advanced nations since 1960. Findings suggest recessions in such circumstances are much costlier and slightly longer. But the outcome can be affected by policy, and it’s high time that policymakers act swiftly and decisively. Views 70568The euro could surpass the dollar within ten yearsJeffrey Frankel, 18 March 2008One of the world’s leading international economists explains how the euro could surpass the dollar as the premier international currency and examines the geopolitical implications of such a shift. Views 69832Subprime ‘crisis’: FAQsStephen Cecchetti, 13 August 2007Here are the basic how's and why's of what the Fed has been doing to calm financial markets. Views 66296Subprime crisis: causes, consequences and curesCarmen M. Reinhart, 15 March 2008We may just have started to feel the pain. Asset price drops – including housing – are common markers in all the big banking crises over the past 30 years. GDP declines after such crises were both large (-2% on average) and protracted (2 years to return to trend); in the 5 biggest crises, the numbers were -5% and 3 years. This column, based on the author’s testimony to the Congress, picks through the causes and consequences. It argues that when it comes to ‘cures,’ it would be far better to get the job done right than get the job done quickly. Views 64386Rescuing our jobs and savings: What G7/8 leaders can do to solve the global credit crisisBarry Eichengreen, Richard Baldwin, 9 October 2008Without rapid and coordinated action by G7/8 leaders, this financial crisis could turn into a jobs crisis, a pension crisis and much more. This column introduces a collection of essays by leading economists on what the G7/8 leaders should do this weekend. The dozen essays present a remarkable consensus on a few points: we need immediate, coordinated global action that includes recapitalisation of the banks. Views 64163Good news at last? The recession will be over sooner than you thinkNicholas Bloom, Max Floetotto, 12 January 2009A key source of the today’s economic weakness is uncertainty that led firms to postpone investment and hiring decisions. This column, by the authors whose model forecast the recession as far back as June 2008, report that the key measures of uncertainty have dropped so rapidly that they believe growth will resume by mid-2009. This means any additional economic stimulus has to be enacted quickly. Delaying to the summer may mean the economic medicine is administered just as the patient is leave the hospital. Views 60616Trade and inequality, revisitedPaul Krugman, 15 June 2007It’s no longer safe to assert that trade’s impact on the income distribution in wealthy countries is fairly minor. There’s a good case that it is big, and getting bigger. I’m not endorsing protectionism, but free-traders need better answers to the anxieties of globalisation’s losers. Views 59949Krugman’s view on the dollarRichard Baldwin, 2 October 2007As the dollar has started to slide, the question is: how far, how fast? This column, which is based on Paul Krugman’s recent Economic Policy article suggests the answers are: pretty far and pretty fast. Views 59071Mother of all bailouts and what it means for EuropeDaniel Gros, Stefano Micossi, 20 September 2008The radical moves in the US have direct implications for European banks and indirect implications for European governments. This column discusses the likely channels and notes that several European banks are both too big to fail and may be too big to be saved by their national governments alone. Views 58958How bad could the crisis get? Lessons from IcelandJon Danielsson, 12 November 2008Iceland’s banking system is ruined. GDP is down 65% in euro terms. Many companies face bankruptcy; others think of moving abroad. A third of the population is considering emigration. The British and Dutch governments demand compensation, amounting to over 100% of Icelandic GDP, for their citizens who held high-interest deposits in local branches of Icelandic banks. Europe’s leaders urgently need to take step to prevent similar things from happening to small nations with big banking sectors. Views 58001Iceland’s banking collapse: Predicable end and lessons for other vulnerable nationsWillem Buiter, Anne Sibert, 30 October 2008In the first half of 2008, Buiter and Sibert were invited to study Iceland’s financial problems. They identified the “vulnerable quartet” of (1) a small country with (2) a large banking sector, (3) its own currency and (4) limited fiscal capacity – a quartet that meant Iceland’s banking model was not viable. How right they were. This column summarises the report, which is now available as CEPR Policy Insight No. 26 with an October 2008 update. Views 55395Tennis, pressure and the gender wage-gapM Daniele Paserman, 26 June 2007Female tennis players play more conservatively and commit more unforced errors when playing critical points. Does this explain the upper-echelons wage gap? Views 54888Slave trade and African underdevelopmentNathan Nunn, 8 December 2007Slavery, according to historical accounts, played an important role in Africa’s underdevelopment. It fostered ethnic fractionalisation and undermined effective states. The largest numbers of slaves were taken from areas that were the most underdeveloped politically at the end of the 19th century and are the most ethnically fragmented today. Recent research suggests that without the slave trades, 72% of Africa’s income gap with the rest of the world would not exist today. Views 54134Open Letter to European leaders on Europe’s banking crisis: A call to actionAlberto Alesina, Richard Baldwin, Tito Boeri, Willem Buiter, Francesco Giavazzi, Daniel Gros, Stefano Micossi, Guido Tabellini, Charles Wyplosz, Klaus F. Zimmermann, 1 October 2008This is a once-in-a-lifetime crisis. Trust among financial institutions is disappearing; fear may spread. Last week’s US experience showed that saving one bank at a time won’t work. A systemic response is needed and in Europe this means an EU-led initiative to recapitalise the banking sector. Unless European leaders immediately unite to address this crisis before it spirals out of control, they may find themselves fighting over how best to salvage the aftermath. Views 53535Is the LIBOR-OIS spread due to predatory behaviour?Francesco Giavazzi, 2 June 2008There has been a persistent spread between the rate at which banks lend each other money and government-backed securities yields in recent months. This column describes hypotheses explaining the spread – including the possibility that banks aren’t lending in order to bankrupt acquisition targets. Views 53342Do you really want to tax ability?N. Gregory Mankiw , Matthew Weinzierl, 12 June 2009Should the income tax system include a tax credit for short taxpayers and a tax surcharge for tall ones? This column explains how the standard utilitarian framework for tax policy analysis says that individual attributes correlated with wages, such as height, should determine tax liabilities. Taller individuals should pay higher taxes. If this is objectionable, then something is wrong with the standard framework. Views 52050Culture can determine long-run growthYuriy Gorodnichenko, Gérard Roland, 21 September 2010Does culture affect long-run growth? This column argues that countries with a more individualist culture have enjoyed higher long-run growth than countries with a more collectivist culture. Individualist culture attaches social status rewards to personal achievements and thus provides not only monetary incentives for innovation but also social status rewards. The shortcomings of using states for federal macroeconomic fiscal policyRobert P Inman, 15 September 2010What can we learn from US President Obama’s fiscal stimulus? This column argues that channelling the stimulus package through state governments exposed it to agency costs, free-riding problem, and political expediency. As a result, the stimulus has failed to meet its objectives at the state level. The lesson is that fiscal stimulus should be conducted centrally. The Empire strikes backAvinash Persaud, 14 September 2010The role of financial institutions in the global crisis has led to a consensus that financial regulation must change. This column argues that the banking lobby, far from depleted, has struck back with a vengeance. It has managed to postpone the much needed regulation for a time when the need for it will be forgotten. The decade after the fall: Diminished expectations, double dips, and external shocksCarmen M. Reinhart, Vincent Reinhart, 13 September 2010Is the global economic recovery about to grind to a halt? This column provides evidence on economic performance in the decade after a macroeconomic crisis. It finds that growth is much slower and as well as several episodes of “double dips”. It adds that many of these economies experience plain “bad luck” that strikes at a time when the economy remains highly vulnerable. Do countries “graduate” from crises? An historical perspectiveRong Qian, Carmen M. Reinhart, Kenneth Rogoff, 31 August 2010Are 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. A helicopter drop for the US TreasuryRicardo Caballero, 30 August 2010The 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. Strengthening the financial system: The benefits outweigh the costsStephen Cecchetti, Benjamin H Cohen, 20 August 2010The 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. Cutting the corruption tax: A way out for GreecePaul Romer, 11 August 2010For 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. Debt and growth revisitedCarmen M. Reinhart, Kenneth Rogoff, 11 August 2010With 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. The “stimulus debate” and the golden rule of mountain climbingFrancesco Giavazzi, 22 July 2010The global macroeconomy is at a juncture; some economists argue for continued fiscal stimulus to avoid a double dip recession while others argue for fiscal prudence. In this column, one of the world's leading macroeconomists argues for continued stimulus combined with a plan to ensure long-run sustainability by reforming the funding of pension liabilities. Leaving the euro: Lessons from ArgentinaMario I. Blejer, Eduardo Levy-Yeyati, 21 July 2010Rumours of Eurozone break-up are mounting. This column argues that exiting a strong currency for a weak one poses almost unthinkable challenges, from the redenomination of contracts and the imposition of bank restrictions to the restructuring of external debt and limiting of capital mobility. Lessons from Argentina illustrate just how radical the changes would need to be. How housing slumps endAgustín S. Bénétrix, Barry Eichengreen, Kevin H. O’Rourke, 21 July 2010The world's current economic problems started when housing bubbles burst in several advanced economies. Economic recovery without housing market recovery is unlikely to be sustained. This column presents new research on the probability of housing slumps ending. There is at least a one-in-eight chance of housing slumps in the three big economies (US, Japan and Germany) ending imminently, but there is nothing approaching the same probability elsewhere. If things turn out as projected here, we may be about to have a test of the locomotive theory – whether the big economies can pull along their smaller brethren – both for housing markets and generally. The low-interest-rate trapFrancesco Giavazzi, Alberto Giovannini, 19 July 2010Should the crisis spur central banks to change how they conduct monetary policy? This column argues that strict inflation targeting, which ignores financial fragility, can produce interest rates that push the economy into a “low-interest-rate trap” and increase the likelihood of a financial crisis. How will the new exchange rate regime affect the Chinese economy?Barry Eichengreen, Andrew K. Rose, 21 June 2010China’s announcement of greater renminbi flexibility was welcomed by US and European leaders. This column discusses new empirical research on what happens to economies when they exit exchange rate pegs that are resisting appreciation. Data from 27 cases suggest that growth slows but only modestly, and there is no evidence of economic and financial damage as a result – certainly nothing like the fears that China's next decade could look like Japan’s lost decade. Sources of the WTO’s woes: Decision-making’s impossible trinityRichard Baldwin, 7 June 2010The WTO is in a funk – unable to conclude the Doha Round even as its members liberalise unilaterally and regionally. This column introduces a Policy Insight arguing that the tactics used to conclude the last round pushed the organisation into decision-making’s “impossible trinity” (consensus, uniform rules, and strict enforcement). The Doha Round may succeed – defeating the triangle with the 'big package' tactic – but this tactic does not work fast enough to allow the WTO to confront 21st century challenges in a timely manner. At least one of the impossible triangle’s corners will have to be modified. Home equity extraction: Where did all the money go?Daniel Cooper, 30 May 2010In this column, Federal Reserve Bank of Boston economist Daniel Cooper presents new evidence suggesting that the spending impact of equity extraction during the recent US housing boom was relatively small compared with the household balance sheet changes and residential investment. This finding contrasts with recent findings claiming that households consumed the vast majority of the money they extracted. The electoral consequences of large fiscal adjustmentsAlberto Alesina, Dorian Carloni, Giampaolo Lecce, 29 May 2010The market turmoil in recent weeks pose a key question: can European governments credibly commit to cutting their deficits? This column presents evidence that fiscal adjustments do not increase the likelihood of electoral defeat for incumbent governments. Europe’s fiscal problems can be solved – it is now up to today’s leaders to step up. Africa resists the protectionist temptation: The fifth Global Trade Alert reportSimon J Evenett, 28 May 2010Despite the return of economic growth, the threat of protectionism still lingers. This column presents the fifth report from the Global Trade Alert with a focus on sub-Saharan Africa. The report is the busiest yet – the number of identified protectionist measures has risen by 40%. No four-digit product line, no economic sector, and no jurisdiction have emerged unscathed by crisis-era protectionism. An autopsy of the US financial system: Accident, suicide, or negligent homicide?Ross Levine, 25 May 2010Many policymakers stress that the global crisis was caused by a series of unforeseen events and “suicidal” behaviour by market players. This column argues that this is a self-serving narrative. Policymakers designed, implemented, and maintained policies that destabilised the financial system in the decade leading up to 2006 – and were fully aware they were doing so. It is a case of “negligent homicide”. Educational attainment in the world, 1950–2010Robert Barro, Jong-Wha Lee, 18 May 2010Empirical investigations of the role of human capital require accurate measures across countries and over time. This column describes a new dataset on educational attainment for 146 countries at 5-year intervals from 1950 to 2010. The new data, freely available online, use more information and better methodology than existing datasets. Among the many new results is that the rate of return to an additional year of schooling on output is quite high – ranging from 5% to 12%. |
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