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20 сентября, 00:00

Foreign expansion, competition, and bank risk

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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.

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20 сентября, 00:00

Strikes and local politics

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Conflicts in the labour market are detrimental to economic growth and welfare. Sweden was among the countries with the highest incidents of industrial disputes in the 1920s, but experienced declining levels from the 1930s onward. Using Swedish data from 1919 to 1938, this column shows that towns with both powerful unions and strong Social Democratic presence experienced labour market peace. The results point toward the importance of labour market peace for strategic political reasons, rather than to politicians offering tangible concessions via municipal governmental power.

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19 сентября, 00:00

Re-emerging currency mismatches

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A large share of Turkey’s bonds are denominated in foreign currencies, and the Turkish lira has depreciated. This recalls the currency mismatches that contributed to many crises in the 1990s. The column argues that many emerging economies like Turkey's are better able to avoid these crises thanks to improved policies, such as inflation targeting, that have helped foster local currency bond markets. Emerging markets policymakers must not backslide on this progress if they want to maintain financial stability.

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19 сентября, 00:00

Firm size, productivity, and pay in a service economy

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The evidence that bigger firms pay higher wages and have higher productivity is mainly based on manufacturing, which nowadays accounts for a small share of the economy. Drawing on a unique micro-aggregated dataset, this column reveals that while the size premia for both wages and productivity are significantly weaker in market services than in manufacturing, the link between wages and productivity is stronger – the most productive firms at the top are not necessarily the largest ones in terms of employment, but they do pay the best. This increases the likelihood of productivity and wage gains being shared with fewer workers, a further challenge to achieving inclusive growth in the new service economy.

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19 сентября, 00:00

Heterogeneous effects of trade agreements across product types

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The negotiation of trade deals among distant trade partners is hot on policymakers’ agendas as a means to facilitate integration into global supply chains. This column examines the impact of trade agreements at varying levels of distance across product types. Granular bilateral trade data show that the boost from trade agreements is smaller over longer distances, and that this is primarily driven through the channel of intermediate goods.

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18 сентября, 00:00

Losing soft power lowers exports

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The export consequences of a country’s leadership style are one manifestation of ‘soft power’.  This column uses Gallup’s World Poll data and a gravity model of trade to examine the link between the attractiveness of the US to foreigners under the Trump administration and US exports. The results suggest a decline in foreign approval of US leadership between 2016 (Obama’s last year) and 2017 (Trump’s first year) may have lowered US exports by at least 0.2% or, over $3 billion.

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18 сентября, 00:00

The increasing faith in macroprudential policies

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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.

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18 сентября, 00:00

Testing with accountability improves student achievement

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School systems increasingly use student assessments for accountability purposes. By combining accountability reforms with international student achievement data over the past 15 years, this column shows that the expansion of standardised testing with external comparisons has improved student achievement in maths, science, and reading, while internal testing or teacher inspectorates without external comparisons have not. 

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17 сентября, 00:00

Using Benford’s Law to detect tax fraud in international trade

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Smuggling, along with other forms of border tax evasion, is a substantial problem around the world. This column uses Benford’s Law, which holds that the leading digits in various types of numerical data are not uniformly distributed, to identify suspicious import flows. Results using Turkish data suggest that deviations from Benford’s Law are consistent with higher rates of tax evasion. The approach could be employed by authorities to identify shipments that merit greater scrutiny. 

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17 сентября, 00:00

The government should target the stock market

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Originally published in February 2009, this column proposes a new paradigm to reconcile Keynesian economics with general equilibrium theory. It suggests that, just as it sets the fed funds rate to control inflation, the Fed should set a stock market index to control unemployment. This would not let every manufacturing firm and every bank fail at the same time “as a result of speculative movements in markets that serve no social purpose.”

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17 сентября, 00:00

Why central banks should not be inflation nutters

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Previous studies have suggested that for central banks, a focus on inflation stabilisation is enough to stabilise other macroeconomic variables, and that focusing on economic activity can even be harmful. Using a model similar to those in use at central banks, this column studies the welfare implications of increasing the weight on economic activity in the central bank’s objective. The results suggest that stabilising measures of economic activity should be one of the primary objectives of central banks, as important as or even more important than stabilising inflation around its target. 

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16 сентября, 00:00

The effect of machine translation on international trade

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Recent years have seen dramatic progress in the predictive power of artificial intelligence in many areas, including speech recognition, but empirical evidence documenting its concrete economic effects is largely lacking. This column analyses the effect of the introduction of eBay Machine Translation on eBay’s international trade. The results show that it increased US exports on eBay to Spanish-speaking Latin American countries by 17.5%. By overriding trade-hindering language barriers, AI is already affecting productivity and trade and has significant potential to increase them further.