CEPR News In focus this week: 18 May 18 May 2023 This weekly press briefing highlights some of the latest research reports, discussion papers and other publications from CEPR. It also features some of the latest columns on VoxEU, as well as new blogs/reviews, audio interviews and short films.
IS DE-DOLLARISATION HAPPENING? Writing at VoxEU, Barry Eichengreen argues that while there is evidence of a decline in the dollar’s share of allocated foreign exchange reserves, reports of its demise as the dominant global currency have been greatly exaggerated. Among the factors behind the decline are the need for central banks to intervene in foreign exchange markets and changes in interest rates, but there is little evidence of an effect of sanctions. The majority of the shift away from the dollar has been towards nontraditional reserve currencies.
EU COMMISSION'S CMDI PROPOSAL HOLDS PROMISE FOR ENHANCED BANK RESOLUTION AND FINANCIAL STABILITY Writing at VoxEU, Mathias Dewatripont, Peter Praet and André Sapir argue that the Crisis Management and Deposit Insurance proposal by the European Commission has the potential to improve bank resolution in the EU while protecting depositors and financial stability. The authors suggest it should be accompanied by further efforts to increase loss-absorbency and liquidity requirements, supervision, and managerial accountability in order to reduce moral hazard, while taxpayer interests could be better served if additional flexibility were granted to resolution authorities to temporary nationalise troubled banks under state aid control.
THE EXTRAORDINARY GENEROSITY OF CENTRAL BANKS TOWARDS BANKS Since central banks started their fight against inflation, they have transferred massive amounts of their profits to banks. Writing at VoxEU, Paul De Grauwe and Yuemei Ji suggest that minimum reserve requirements are a valid alternative, yet they have met fierce resistance because they are seen as introducing distortions and departures from efficiency. However, the authors argue that successive financial crises have shown there is a trade-off between efficiency and stability. The emphasis of central bankers on using policy tools that do not interfere with market forces comes at the price of less stability and more financial crises.
IMPROVED ACCESS TO NON-POLICE SUPPORT SERVICES CAN OPTIMIZE POLICE RESOURCES WHILE SAFEGUARDING DOMESTIC VIOLENCE VICTIMS In the aftermath of a police-reported incident of domestic violence, victims may receive help through police or non-police support services. A new study by Jesse Matheson, Martin Koppensteiner and Reka Plugor examines what happens to the uptake of police services when access to non-police services is facilitated through a caseworker. The research shows that victims assigned a caseworker were less likely to provide a witness statement to police, but perpetrator convictions were not affected and statement retractions fell to almost zero. This suggests improving access to non-police services could lead to a more efficient use of police services without compromising the wellbeing of victims.
CAPTURING READERS' ATTENTION: Ads alongside serious news articles boost brand recall and purchase probability, regardless of content type Advertisers are sometimes reluctant to feature their products alongside serious news items, fearing the products will acquire negative associations. A new study by Andrey Simonov, Tommaso Valletti and Andre Veiga uses non-intrusive eye-tracking technology to measure the attention readers paid to each article and advertisement to show that articles that captured a reader’s attention increased their attention to ads on the same page, enhancing brand recall and purchase probability. But the type of content – ‘hard’ versus ‘soft’ news – had no impact on an ad’s effectiveness.
HOW THE US FILM INDUSTRY MITIGATES FINANCIAL RISK Film production is a high-risk venture that requires large up-front investment. Using data from loan registers, copyright registration, and interviews with industry experts a study by Alexander Cuntz, Alessio Muscarnera, Prince Oguguo and Matthias Sahli explores the private-sector solutions to financial risk mitigation and the most common types of financial deals in the US film industry. The research shows that intellectual property rights are widely used as a collateral in lending deals, in a multi-billion dollar industry where tangible assets are particularly scarce. Co-production, loan syndication, risk indemnification, and insurance can help transfer and mitigate risk among stakeholders in US film finance.
WHEN WILL THEY EVER LEARN? The US banking crisis of 2023 While Silicon Valley Bank was in some ways a special case, the ultimate cause of the run on the bank was a solvency problem which was, and is, not unique to SVB. Writing at VoxEU, Anat Admati, Martin Hellwig and Richard Portes argue that US authorities should acknowledge the evident banking crisis and suggests reforms to address the underlying solvency problems.
AMERICAN PRECIOUS METALS AND THE RISE OF THE WEST Between the 16th and 18th centuries, at least 180,000 tons of silver and around 4,000 tons of gold were extracted from the Americas and transported to Europe. How much of western Europe’s economic transformation can be attributed to this windfall? Yao Chen tells Tim Phillips about new research that upends the conventional wisdom.