CEPR News In focus this week: 23 February 23 Feb 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.
EURO WEAKNESS IN 2022 European panel of economists discuss the reasons for the euro’s deprecation against the dollar in 2022: - 56% of panellists think that monetary policy differences were the main cause for the euro’s decline - 30% attribute the value of the euro to developments in the real economy. - Panel nearly unanimous that the ECB shouldn’t respond to the euro’s devaluation, but focus on maintaining price stability.
UKRAINE SUPPORT TRACKER REVEALS STARK DISPARITIES IN WESTERN AID: US Tops List, France, Italy, and Spain Fall Short Writing at VoxEU, Christoph Trebesch introduces the Ukraine Support Tracker, a comprehensive database of humanitarian, military, and financial aid, which reveals striking differences in the size and type of support promised by Western countries in 2022: - The US was by far the largest supporter in absolute terms, followed by the EU institutions. Eastern European countries stand out when measuring aid as a percentage of donor GDP. - Some rich Western European countries, such as France, Italy, and Spain, have provided much less support. - New aid pledges have been erratic and cyclical, suggesting the need for a central agency to coordinate Western aid to Ukraine.
ANTI-CORRUPTION POLICIES FOR THE RECONSTRUCTION OF UKRAINE Despite meaningful progress since 2014, issues with corruption and perceptions of corruption remain in Ukraine. Writing at VoxEU, Torbjörn Becker et al. outline key anti-corruption policies that should guide the reconstruction of the country going forward. These include removing opportunities for rent extraction, improving monitoring and transparency, educating the population on the costs of corruption, and ensuring efficiency and trust in legal institutions. These policies will be crucial for securing Ukraine’s long-term growth and making it a strong member of the EU.
DEBUNKING 'ECONOMIC' ARGUMENTS AGAINST DEEPER INTERVENTION IN UKRAINE Writing at VoxEU, Rüdiger Bachmann addresses common ‘economic’ arguments made by those who oppose deeper interventions in Ukraine: - Sanctions are already having an effect: Russia’s real economic activity has declined, as has average welfare. - Meanwhile, little has happened to the European economies even after Russia stopped fuel fossil exports.
GLOBAL SUPPORT NEEDED TO ALLEVIATE ECONOMIC HARDSHIPS CAUSED BY RUSSIAN ATTACKS ON POWER GRID AND NAVAL BLOCKADE Writing at VoxEU, Oleksiy Blinov and Simeon Djankov argue that the damage to Ukraine’s economy caused by Russia’s attacks on the power grid and the stalled recovery of Ukraine’s grain exports due to Russia’s continued naval blockade calls for increased global support. The economic difficulties that Ukraine’s population is facing due to the war have multiplied. Expanded and extended diplomatic and financial help will ease some of these difficulties.
THE TEACHING PRACTICES THAT BEST IMPROVE EXAM GRADES: Evidence from England A study by Simon Burgess, Shenila Rawal and Eric Taylor analyses classroom observation of teachers in England and student test scores to identify which teaching practices contribute best to raising pupils’ exam grades. The results show that: - Teachers make very different decisions on how to spend class time, and these differences matter for exam scores, even with teacher’s instructional skills taken into account. - In maths classes, for example, students score higher on the GCSE exams when their teachers give more time for individual practice. - For English exams, the key activity that raises GCSE scores is peer interaction. - The size of these effects is significant.
TIME TO STEP UP POLICY COORDINATION IN THE EURO AREA The euro area economy has weathered the shock emanating from Russia’s invasion of Ukraine with impressive resilience. In spite of initial worst-case scenarios, it now looks like the euro area could avoid a recession altogether and recent readings suggest that inflation rates may have peaked already. Irrespective of these positive macroeconomic developments, risks abound on the horizon, requiring policymakers’ sustained vigilance and action. This study by Reinhard Felke and Nicolas Philiponnet focuses on diverging inflation trends in the euro area, the interplay between monetary and fiscal policy, and supply-side issues.
INCUMBENTS HAVE THE UPPER HAND IN ELECTIONS – COORDINATION FAILURES GIVE THEM A FURTHER ADVANTAGE The advantages of incumbency in political campaigns are well established. A study by Kevin Dano et al. examines the interplay of incumbency and coordination, another force that influences election outcomes. Failures to coordinate can allow multiple candidates with similar platforms to split the vote, benefitting candidates with less representative positions and resulting in suboptimal officeholders. The authors show how the two forces compound one another in French elections, with coordination failures increasing an incumbent’s advantage, and encourage policymakers to keep the combination in sight when reforming the electoral process.
THE RUSSIAN INVASION AND THE RISKS TO GLOBAL FINANCIAL STABILITY Writing at VoxEU, Stephen Cecchetti and Kim Schoenholtz discuss the considerable risks posed by the Russian invasion of Ukraine to the complex web of arrangements that comprise our global financial system. The authors show that by fuelling the fragmentation of the world into security zones and increasing the focus on national defence, the attack on Ukraine threatens the international economic integration over the past 50 years that the global financial system made possible, and that still benefits billions of people.
STARTUP ACQUISITIONS BY LARGE INCUMBENTS: Fuelling or Foiling Innovation? Writing at VoxEU, Christian Fons-Rosen, Pau Roldan-Blanco and Tom Schmitz discuss the positive and negative effects of startup acquisitions on innovation and growth and assesses their relative importance. The findings suggest that negative effects slightly dominate, and that limiting acquisitions would increase the rate of economic growth by up to 0.03 percentage points per year. While the prospect of an acquisition might generate incentives for entrepreneurs to create more new businesses, some incumbents might acquire startups only to subsequently drop their innovative ideas.