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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.
Financial markets have faced several disruptions to financial stability during 2022 and 2023, highlighting the vulnerability of banking and derivatives markets. Writing at VoxEU, Timo Löyttyniemi argues that while each disturbance was separate, they were connected by several factors, including rising inflation, higher interest rates, as well as individual errors. In times of weakened financial stability, panic can create a self-fulfilling crisis. Löyttyniemi shows that authorities acted promptly and decisively, as each crisis required a unique solution, especially the larger crises.
Writing at VoxEU, Cristina Altomare and Francesco Giavazzi describe Italy under Mario Draghi used an unorthodox economic strategy to address the recent energy price shock, which included fiscal policy and other government instruments to dampen the effects of the shock, avoiding a fall in consumption and at the same time preventing a rise in the debt-to-GDP ratio.
Banks play a crucial role in the transition to a low-carbon economy, but they also expose themselves to climate transition risk. A study by Isabella Mueller, Huyen Nguyen and Trang Nguyen shows that banks use corporate loan securitisation to shift climate transition risk to less-regulated shadow banking entities. This behaviour affects carbon premia in loan contracts. When banks can use securitisation to manage transition risk, their climate policies that target only activities reflected in their books may not be as effective as bank regulators hope for.
The subsidised emergency takeover of Credit Suisse by UBS brings the current global ‘too big to fail’ regime into question. Writing at VoxEU, Aymo Brunetti argues that an in-depth analysis of the global resolution framework by both regulators and academics is needed. The main question is whether a resolution of a global systemically important bank is indeed feasible in plausible scenarios. An affirmation would clearly be the best possible result of this analysis. However, if such a resolution proves not to be realistic, then there should be no hesitation to drastically reduce the global risks of such institutions via regulation of their business models.
The Russia-Ukraine war led to unprecedented increases in the price of natural gas in the euro area, prompting concerns about possible adverse effects on inflation expectations. A study by Maximilian Böck and Thomas Zörnera examines the relative importance of the expectation channel in the transmission of natural gas price shocks to inflation and suggests that managing expectations plays a pivotal role in stabilisation policies.
A study by Oren Danieli, Noam Gidron, Shinnosuke Kikuchi and Ro'ee Levy looks at drivers of the rise of the populist right between 2005 and 2020 and finds that the primary driver in Europe is changing priorities of voters rather than changes in party position or voter attributes. Older, non-unionised, less-educated men are particularly, and increasingly, inclined to prioritise nationalist cultural issues over a party’s economic positions.
A study by Lu Han, Liwa Rachel Ngai and Kevin Sheedy examines the effects of high property transaction taxes on household and landlord decisions using data on Toronto's housing sales and leasing transactions from 2006 to 2018 The research finds that high transaction taxes increase the demand for rental properties and reduce homeownership rates and mobility.
€-coin fell further into negative territory in May (to -0.42, from -0.15 in April).