CEPR News In focus this week: 13 October 13 Oct 2022 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.
Surge in energy costs is significantly hitting European firms’ profits, increasing business risk, and even jeopardising entire production sectors A study by Fabrizio Ferriani and Andrea Gazzani finds that the effects of the energy shock caused by the Ukraine-Russia war have already started to materialise in corporate asset prices, in terms of lower equity returns and higher CDS spreads for firms with energy intensive production functions. The research indicates that a non-negligible number of firms would lose investment-grade status should energy prices remain at the record high levels reached at the end of July 2022 for an extended period.
A ‘modern excess profit tax’ targeting the rise in the stock market capitalisation of energy companies Writing at VoxEU, Manon François, Carlos Oliveira, Bluebery Planterose and Gabriel Zucman propose a modern way to tax the energy industry’s excess profits from the war in Ukraine. Targeting increases in market capitalisation would create a tax much harder to avoid than standard excess profit taxes, while making it possible to capture rents irrespective of where multinational companies book their profits. The authors estimate that with a tax rate of 33%, the EU could collect around €80 billion in revenue.
How to assist households facing rising energy costs Will the government’s proposed energy cost support policies, including the Energy Price Guarantee, leave the average UK household better off? Leading UK economists from the 2022 CfM survey are evenly split, but a large majority (over 90%) suggest that other policies are more effective, including conditional or targeted transfers (supported by 65%) and price caps linked to energy use (supported by 23%). A majority of 72% would like to see the household support fully or partially financed by a windfall tax on energy companies.
The effectiveness of green quantitative easing (QE) in limiting global warming compared with a carbon tax A study by Raphael Abiry, Marien Ferdinandusse, Alexander Ludwig and Carolin Nerlich shows that by shifting its portfolio to exclusively contain ‘green’ bonds, central banks can limit the rise in global temperatures, although these effects are modest, and significantly smaller than a carbon tax. Nevertheless, green QE can still be an effective complementary tool to fiscal policy, particularly in the case of insufficient coordination of carbon taxes on a global scale.
How popular personal finance advice compares to (and often conflicts with) economic theory Popular personal finance gurus dispense advice to millions of people. What are they telling their audience? Writing at VoxEU, James Choi summarises the advice from the 50 most popular personal finance books to show that the most significant divergences from economic theory occur in advice about savings and debt, where popular authors try to accommodate the limited willpower and motivation of their readers. Popular advice about the most important aspects of asset allocation ends up being largely similar to economic theory’s recommendations, but due to different reasoning.
Working from home around the world Results from a survey of 27 countries in 2021 and early 2022 suggests that most workers have been favourably surprised by their productivity at home. The study by Cevat Giray Aksoy et al. finds that employer plans for levels of work from home after the pandemic rise strongly with these individual-level productivity surprises. Planned levels also rose with the stringency of government-mandated lockdowns during the pandemic. Employees value the option to work from home 2–3 days per week at 5% of pay, on average, with higher valuations for women, people with children, and those with longer commutes.
How the developing world can frontload emission reductions despite tight budgets and looming debt crises Writing at VoxEU, Moritz Kraemer, Dirk Schoenmaker and Ulrich Volz propose the establishment of a Finance Facility against Climate Change. Funds raised through the facility’s bond issuance would be earmarked for emission reduction programmes in poor countries, and the bonds would be backed by rich nations’ commitments of future disbursements to cover debt service obligations of the bonds. This would allow the necessary frontloading of climate spending in poor countries, while minimising the short-term impact on donor countries’ budgets.
How social media influences the news We know that millions of people get their news from social media, but does Twitter influence what traditional news outlets report as well? Julia Cagé tells Tim Phillips about a new study of 2 billion tweets.