Search the site
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.
Bank of England governor Mark Carney warned after the 2016 Brexit vote that the UK is reliant on the “kindness of strangers” to fund its increasing current account deficit. In a new CEPR study, Andreas Fischer and Pınar Yeşin examine whether firms in Switzerland attenuated their investments in the UK following the Brexit vote or whether British-controlled firms in Switzerland repatriated their foreign assets to the UK. The research shows evidence that the Brexit shock permanently dampened Swiss foreign investments in the UK is limited at best.
Germany has become the second-most important destination for migrants worldwide. Using all waves from the microcensus (resulting in more than 24 million individual observations), a new CEPR study by Paul Berbée and Jan Stuhler examines their labour market integration over the last 50 years and highlight differences to the US case.
A new CEPR study by Christine Binzel, Dietmar Fehr and Andreas Link examines one of the first international initiatives to prevent the illicit exploitation of natural resources and promote peace: the Kimberley Process Certification Scheme (KPCS). By tracking diamonds and limiting trade to diamonds that are certified, the KPCS aims to prevent so-called conflict diamonds from entering world markets. The authors exploit grid-cell level variation in the propensity to extract alluvial diamonds, and compare grid cells with and without this propensity before and after the introduction of the KPCS in 2002.
The state-supported acquisition of Credit Suisse by UBS in March 2023 quickly tranquilised nervous markets and clients. Nevertheless, it has raised broader questions on the viability of the ‘too big to fail’ regime. Following the publication of a report from the Expert Group on Banking Stability which discusses lessons and makes recommendations to address gaps in the regime, Yvan Lengwiler and CEPR President Beatrice Weder di Mauro present findings that focus on the ‘why’ and ‘how’ of the crisis, emphasising the lessons with broader implications beyond Switzerland.
Real estate is frequently used as collateral by firms in the euro area, potentially impacting borrowing and the broader economy when commercial real estate prices decline. Using data on five million pieces of real estate collateral across the euro area, a study by Aoife Horan, Barbara Jarmulska and Ellen Ryan shows that real estate market dynamics affect credit availability through the collateral channel. However, banks did not significantly devalue real estate collateral during the pandemic, challenging conventional assumptions about the banking system's role in these dynamics.
Surging inflation has increased focus on firm markups and profits, yet standard measures omit important corporate costs. A study by Ed Manuel, Sophie Piton and Ivan Yotzov constructs an alternative measure of corporate profits to capture UK firm earnings in excess of all production costs, showing a decline since the start of 2022, consistent with evidence from historical energy shocks. This decline has not been uniform across firms, however: firms with higher market power have been better able to increase their margins, while others have experienced large declines.
A study by Olivier Coibion, Yuriy Gorodnichenko, Francesco Grigoli and Damiano Sandri examines whether a large bank crash triggers other panic-driven runs, and the effectiveness of public communication in containing such risk. Using household surveys conducted following Silicon Valley Bank's collapse, the authors find that households were likelier to withdraw deposits from their own banks in the aftermath and while communication from the Federal Reserve contained the risk, communication from politicians influenced only their electoral base.
Writing at VoxEU, Harald Fadinger, Philipp Herkenhoff and Jan Schymik evaluate the impact of Germany's early-2000s labour market reforms on the broader euro area, and relate these findings to the current drive for large, but largely uncoordinated, industrial policy initiatives in the EU.
COVID-19 led to a sharp drop in central business district visits, and while they've partially rebounded by mid-2022, remote work has kept large US cities at 60% of pre-pandemic levels. Writing at VoxEU, Ferdinando Monte, Charly Porcher and Esteban Rossi-Hansberg explains how big cities can exhibit two stable equilibria, one where most people commute and one where most people stay at home. In contrast, conditions in small cities mean there is only one stationary equilibrium, which explains why small cities returned to pre-pandemic commuting levels.
Many individuals are experiencing for the first time inflation considerably above central bank targets. Yet despite this limited experience, inflation expectations of many households have been upward biased relative to ex-post realisations and target rates. Writing at VoxEU, Fabio Braggion, Felix von Meyerinck, Nic Schaub and Michael Weber propose inflation shocks in the more distant past as an explanation for elevated inflation expectations. The research shows that German households living in areas with higher local inflation during the hyperinflation of the 1920s expect higher inflation today.
Can ChatGPT really outperform humans in complex, creative, tacit-knowledge writing tasks? Writing at VoxEU, Claudia Biancotti and Carolina Camassa ask the app to compose a policy brief for the Board of the Bank of Italy. The results show that ChatGPT can accelerate workflows by providing well-structured content suggestions, and by producing extensive, linguistically correct text in a matter of seconds. It does, however, require a significant amount of expert supervision, which partially offsets productivity gains. If the app is used naively, output can be incorrect, superficial, or irrelevant. Superficiality is an especially problematic limitation in the context of policy advice intended for high-level audiences.
Writing at VoxEU, Annamaria Lusardi and Olivia Mitchell examine how much financial literacy, including knowledge of inflation, drives people’s financial decision-making. The research finds that simple measures which have been used around the world confirm strikingly low levels of financial literacy, with consequences for how people manage their personal finances. It is becoming increasingly important to focus on the new field of financial literacy, not only for research by also for teaching and for policy.
A study by Samuel Bazzi, Andreas Ferrara, Martin Fiszbein, Thomas Pearson and Patrick Testa documents how the sprawling influence of Confederate culture in non-South states following the American Civil War promoted widespread and persistent racial animosity and disadvantage in the US. In non-South states, Southern-born migrants disproportionately worked in influential, public-facing occupations in their new communities. The Confederate diaspora was key in the national expansion of the United Daughters of the Confederacy as well as the Ku Klux Klan, and the diaspora also transmitted their ideology to their neighbours.
The Covid-19 pandemic transformed consumer behaviour. Writing at VoxEU, Yoko Konishi describes how the METI Big Data Project, initiated prior to the pandemic, became a vital tool for tracking daily sales trends and consumption behaviour in Japan. Data from about 6,000 stores reveal stark shifts in products’ popularity, such as a surge in demand for masks and a decline in cosmetics. The research demonstrates how mobilising digital technologies and big data in this way can help produce statistics that allow government policies to have an intellectual basis and to be more persuasive.
Residential prices in the US increased in the suburbs during the pandemic relative to neighbourhoods closer to city centres, reflecting a relocation of residents away from downtowns. At the same time, demand for offices fell. Writing at VoxEU, Gilles Duranton and Jessie Handbury argue that these changes can be traced back to the rise of work-from-home arrangements, which have created a ‘commuting dividend’ and a ‘home-office tax’. Changes in urban amenities amplify the effects. While more attractive downtowns are likely to enjoy a renaissance, hosting more creative workers who go into work to benefit from exchanging with others, other downtowns may not recover.
A study by Sascha O. Becker, Volker Lindenthal, Sharun Mukand and Fabian Waldinger finds that academics with ties to colleagues who had emigrated before 1934 were more likely to emigrate themselves, as early émigrés functioned as a bridge, facilitating emigration from Nazi Germany to their new homes. Weighing the relative importance of different networks, the authors find that social ties decay over time while, for highly skilled migrants, professional networks eclipse community networks. As scholars around the world are increasingly at risk of persecution for their political views, ethnicity, and religion, these results highlight the importance of professional networks in facilitating escape from persecution.
Using data from secondary school tests in the Netherlands, a study by Kyra Hanemaaijer, Olivier Marie and Marco Musumeci finds that the already large achievement gap between Muslim and non-Muslim students increased substantially in years when Ramadan overlapped with exams, with those taking exams in the morning most affected. Scheduling tests in the afternoon with no morning exams during Ramadan could minimise the negative repercussions for Muslim students.
Online share trading makes it possible for all of us to diversify our investments, but social media might encourage us to pile into bad investments. Hans Hvide has researched the impact of the arrival of broadband on the investment habits of Norway’s population, and he has some good news for Tim Phillips.
The way that social scientists define populism might lead them to simplistic conclusions that aren’t supported by the historical record. Kevin O’Rourke tells Tim Phillips about the weak links between populism and nativism, and how economists have sometimes been on the wrong side of important policy debates with the people they call populists.
