This week from CEPR: November 18

Thursday, November 18, 2021

Highlights from some of the latest research reports published in the Centre for Economic Policy Research (CEPR) network’s long-running series of discussion papers, as well as some other recent CEPR publications.

Also, links to some of the latest columns on Vox, the Centre’s policy portal, which provides ‘research-based policy analysis and commentary from leading economists’.

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Ethan Ilzetzki, Carmen M. Reinhart, Kenneth Rogoff  
CEPR Discussion Paper No. 16722 | November 2021 

A new CEPR study by Ethan Ilzetzki, Carmen Reinhart and Kenneth Rogoff employs an updated algorithm and database for classifying exchange rate and anchor currency choice, to explore the evolution of the global exchange rate system, including parallel rates, capital controls and reserves, over the last two decades. Several key insights emerge: 

  • The US dollar is even more central to the international financial system than was previously understood and its reach has increased in the 21st century
  • The rise of the euro as an international currency has been far more muted than most economists anticipated two decades ago.
  • The renminbi, still in the shadow of the yen in 2000, has emerged as a contender. But although the renminbi may well be the global currency in the year 2100, to date it has still made limited headways as an international currency. In fact, Chinese overseas lending practices have reinforced rather than diminished the role of the dollar, as Chinese official lending has been overwhelmingly denominated in US dollars to date.
  • De facto exchange rate flexibility has not increased as many had expected, nor have hard fixes with the very important exception Eurozone countries. Intermediate regimes, that range from crawling pegs to managed floating with varying degrees of “management,” dominate. However, despite the scope for floating, exchange rates in general have become notably more stable than in the “non-system” era of the late 20th century.
  • Perhaps most surprisingly, these trends in exchange rate stability have extended to the core of the international monetary system, where G3 currency volatility has declined, precipitously so since 2014.
  • Most currencies are now convertible and capital controls have been removed gradually both in high income and subsequently in developing countries (albeit the pandemic, especially, led to uptick).
  • Massive accumulation of safe (primarily dollar-denominated) assets is in part due to central banks’ attempts to manage their exchange rate while allowing capital to flow freely.


Bei Qin, David Strömberg, Yanhui Wu 
CEPR Discussion Paper No. 16731 | November 2021

Social media platforms are transforming political communication and interaction, particularly in nondemocratic regimes such as China, which has little pre-existing media diversity. Because social media can be used both by and against the regime, it unclear whether social media weaken or strengthen authoritarian regimes. 

A new CEPR study by Bei Qin, David Strömberg and Yanhui Wu examines how social media affect protest dynamics in China, using data from 2009-2017. Based on 13.2 billion microblog posts, the authors use tweets and retweets to measure social media communication across cities and exploit its rapid expansion for identification. Among the findings: 

  • Despite strict government control, Chinese social media have a sizeable effect on the geographic spread of protests and strikes. 
  • While the spread effect is short-lived and predominantly between similar events, social media considerably increase the scope of protests.
  • The effect is likely to be driven by tacit coordination and emotional reactions rather than explicit coordination and sharing tactics.
  • Users who published sensitive posts continued to post similar content, suggesting that the Chinese government permits the posting of sensitive content useful for surveillance while maintaining a generally strict information environment.

The study suggests that China’s strategy aims at achieving the dual goals of utilizing bottom-up in- formation and mitigating the risk of grassroots anti-regime protests. Chinese social media are devoid of content supporting the mechanisms identified in previous studies as the main drivers of the effect of social media on protests. Specifically, very few posts contain explicit information about how to organize protests and protest logistics and tactics, likely due to the Chinese government’s censorship. However, Chinese social media massively diffuse the type of information about protests and strikes that can be useful for government surveillance and gauging public sentiment. In particular, a large number of posts discuss the causes of the events, criticize the government and policies, and express anger and sympathy for protesters. These posts spread quickly and widely, as is evident from the patterns of their retweets.

Figure: Protest count by city (prefecture) 2006-2013

  • ARE LOCKDOWNS STILL BENEFICIAL AMONG VACCINATED POPULATIONS? International evidence on vaccines and the mortality to infections ratio  

Joshua Aizenman, Alex Cukierman, Yothin Jinjarak, Weining Xin
CEPR Discussion Paper No. 16728 | October 2021

Although the impact of sufficiently high level of cumulated vaccines on new cases in a population is relatively muted, its moderating effect on new deaths is substantial, according to new findings in a CEPR study by Joshua Aizenman, Alex Cukierman, Yothin Jinjarak and Weining Xin. The research examines international evidence on vaccines and the mortality to infections ratio, to show that once the total level of vaccinations has reached a sufficiently high level, the incidence of mortality out of a given pool of infected individuals goes down.  

The authors show that avoiding lockouts and other stringent confinement measures stimulates the economy at the cost of an increase in the pool of infected individuals. But given that, in the presence of vaccines, this increase is associated with lower mortality, governments can provide better performance on both mortality avoidance and economic performance. This is essentially a favourable shift in the trade-off between life preservation and economic performance.

Knowledge about the ability of sufficiently high proportion of inoculated population is essential to policymakers, since large pools of infected individuals raises the appearance of new variants and with it the probability that some of them may reduce the effectiveness of vaccines. This is particularly important in view of the fact that the current tendency is to live with the virus implying that air traffic, although lower than in the pre-pandemic era, is maintained at levels that facilitates the spread of new variants across the world

The practical lesson is that, in the presence of a sufficiently high share of inoculated individuals, governments can shade down containment measures, even as infections are still rampant, without significant adverse effects on mortality.

Figure: Total vaccinations, mortality and new cases in Great Britain


Marco Buti              
18 November 2021

The global financial crisis was a particularly testing episode for the EU. Even more testing has been the impact of the Covid-19 pandemic that erupted in March 2020. In a new book, Marco Buti, the Chief of Staff of the Commissioner for the economy and former Director General for Economic and Financial Affairs at the European Commission retraces the analytical underpinnings of the economic policy responses to the two crises. In this column, taken from the introduction to the book, he draws general lessons for the future of EU policymaking based on his personal involvement in crisis management and response.



Rigissa Megalokonomou, Marian Vidal-Fernandez, Duygu Yengin                
11 November 2021

Women are now more likely to pursue a university degree than men, but the proportion of women graduating in economics has decreased or remained stagnant over the past two decades. A study by Rigissa Megalokonomou, Marian Vidal-Fernandez and Duygu Yengin finds that:

  • In European countries during 2013-2018, on average, 38% of economics undergraduate students were women. 
  • The ratio of women to men in economics, controlling for gender differences in enrolment, has been around 0.6 on average and is stable or decreasing. 
  • Eastern European countries have proportionally more women graduating in economics than men.
  • Northern European countries perform poorly and have a gender gap in graduation rates from economics undergraduate degrees.
  • The gender imbalance worsens higher up the professional academic ladder.


Donata Faccia, Miles Parker, Livio Stracca                                        
12 November 2021

Despite the increasing interest in climate change in the central bank community, we still know relatively little about the impact on medium-term inflationary pressure. Writing at Vox, Donata Faccia, Miles Parker and Livio Stracca discusses new evidence for a panel of advanced and emerging economies on the impact of very high temperatures on prices.

The research shows that extreme temperatures have noticeable effects on price developments even in the medium term, although more so in emerging than in advanced economies. On balance, the impact of high temperatures on prices appears to be on the upside in the short term, and on the downside in the medium term.


Alberto Alesina, Matteo F. Ferroni, Stefanie Stantcheva                                        
12 November 2021

A study by Alberto Alesina, Matteo Ferroni and Stefanie Stantcheva uses large-scale survey data to reveal a stark partisan gap on issues of racial inequalities in the United States. The research shows that white Democrats and Black respondents tend to attribute racial inequities to the history of slavery and discrimination – and favour redistributive policies – while white Republicans tend to attribute those inequities to individual decisions or insufficient effort and oppose interventions to reduce them. 

FROM RECOVERY TO EXPANSION, AMID HEADWINDS: The Commission's Autumn 2021 Forecast

Maarten Verwey, Oliver Dieckmann, Przemyslaw Wozniak                                         
16 November 2021

Due to increasing COVID vaccination rates and an improving health situation, since spring many restrictions in the EU have been gradually eased and this ‘reopening’ has fuelled economic growth more than expected. Supported by monetary and fiscal policy, the foundations are in place for sustaining growth. 

However, headwinds come from supply-demand imbalances and higher energy prices. In its Autumn 2021 Forecast, the European Commission expects GDP in the EU and the euro area to grow in 2021 by 5%, in 2022 by 4¼%, and in 2023 by 2½%. The inflation forecast for all three years has been revised up with rates above 2% in 2021 and 2022, but with declines from early 2022 onwards.

COVID-19 UNCERTAINTY: A tale of two tails

Philip Bunn, David E. Altig, Lena Anayi, Jose Maria Barrero, Nicholas Bloom, Steven Davis, Brent Meyer, Emil Mihaylov, Paul Mizen, Gregory Thwaites                                     
16 November 2021


A study by Philip Bunn and colleagues uses survey data from US and UK business executives to show how uncertainty over own-firm sales growth rates over the year ahead roughly doubled in reaction to the COVID uncertainty shock. Firm-level uncertainty receded after spring 2020 but remains much higher than pre-COVID levels. 

The research shows how the nature of this uncertainty has shifted greatly since the pandemic struck, from an enormous widening in perceived downside risk to a sharp increase in upside risk. Economic uncertainty associated with the pandemic has morphed from a tale of the lower tail into a tale about the upper tail.


Daniel Waldenström                                     
17 November 2021

Wealth has changed in nature significantly over the past century, according to a new study by Daniel Waldenström. Once held by the elite, it is now widely held in the form of housing and pension savings. These changes appear to account for the redistribution of wealth over the last century and the fact that its concentration has remained relatively low in more recent decades despite rapid increases in aggregate wealth.  

SOCIAL INSURANCE POLICIES IN TURBULENT TIMES: Short-time work versus unemployment insurance

Giulia Giupponi, Camille Landais, Alice Lapeyre                                      
12 November 2021

While the US aggressively extended generosity of unemployment insurance in the face of the Covid-19 pandemic, Europe heavily subsidised reductions in hours worked and temporary layoffs through short-time work or similar schemes. Writing at Vox, Giulia Giupponi, Camille Landais and Alice Lapeyre dicuss the relative welfare costs and benefits of the two labour market policies during economic downturns. 

The research shows that in countries with already generous unemployment insurance and/or strong employment protection, like those in Europe, strong cyclical short-time work programmes can be an extremely valuable complement to unemployment insurance to respond to recessions.

VACCINATION PASSPORTS IN EUROPE: The antidote to hesitancy?

Mathias Dewatripont 16 November

Is vaccination a choice or a responsibility? Through 2021, policymakers across Europe have used vaccine passports to keep others safe and counter vaccine hesitancy. Mathias Dewatripont discusses the mixed evidence for their effectiveness with Tim Phillips.

Read more about the research discussed in this interview: Mathias Dewatripont, Vaccination strategies in the midst of an epidemic, CEPR Policy Insight No 110.

TOURNAMENTS: Playing to win

Florian Englmaier interviewed by Tim Phillips, 12 November 2021

Tournaments are increasingly being used in business to solve non-routine problems. Florian Englmaier tells Tim Phillips about new research into what gives these teams the will to win. Do they respond to having a common sense of identity, do they want kudos and status from other people, or are they just looking for a cash prize?

Read more about the research presented and download the free CEPR discussion paper: Englmaier, F, Grimm, S, Grothe, D, Schindler, D and Schudy, S. 2021. 'The Efficacy of Tournaments for Non-Routine Team Tasks'.