Recent VoxEU Content en Fake news: Susceptibility, awareness, and solutions The proliferation of fake news poses a growing global threat, affecting politics, individual decision-making, and economic outcomes. This column discusses how informing individuals about their susceptibility to fake news affects their willingness to pay to protect themselves from misinformation. While people often overestimate their ability to discern fake news, raising awareness about their susceptibility affects – causally and positively – their willingness to pay to protect themselves from the adverse consequences of fake news, such as by investing in fact-checking services. 2024-05-21T00:00:00+0000 Tiziana Assenza, Alberto Cardaci, Stefanie Huber c35d6548-8b9d-497e-8552-4ea71e1eb919 VoxEU Column High markups reduce pass-through of cost-push shocks, but only when the shocks are disinflationary To what extent high markups have shaped the recent inflation dynamics? This column presents evidence from the US on how markups affect the pass-through of global oil supply shocks. Higher markups are associated with a lower pass-through of shocks to producer prices only when the shocks are disinflationary. High-markup firms are more likely than low-markup firms to increase their markups, revenues, and profits following disinflationary oil supply shocks. However, high- and low-markup firms respond similarly to inflationary oil supply shocks. These results underscore the benefits that high-markup firms reap from disinflationary cost-push shocks, as well as the likely limited potential of high markups to dampen inflationary pressures. 2024-05-21T00:00:00+0000 Enisse Kharroubi, Renée Spigt, Deniz Igan, Koji Takahashi, Egon Zakrajsek 46995857-d61c-47b4-a327-04ed44d56354 VoxEU Column Interest rates and exchange rates when the money supply goes up The power of monetary policy to affect interest rates and exchange rates depends on the downward slope of the demand function. This column uses the Chinese experiment with parallel currencies to study the impact of sudden increases in money supply. The authors find causal evidence that increases in money supply lead to currency depreciations, and use this to quantify the interest elasticity of reserve demand. The results can be used to understand how the People’s Bank of China maintained the peg between the mainland and parallel currencies. 2024-05-20T00:00:00+0000 Saleem Bahaj, Ricardo Reis 56cc37d5-8ef1-42ff-b7f4-576d6bffe5b5 VoxEU Column The economics of social media The growing interest in regulating the market power and influence of social media platforms has been accompanied by an explosion in academic research. This column synthesises the research on social media and finds that while it has made dramatic progress in the last decade, it mostly focuses on Facebook and Twitter. More research is needed on other platforms that are growing in usage, such as TikTok, especially since these platforms tend to produce different content, distribute content differently, and have different consumers. Studying these changes is crucial for policymakers to design optimal regulation for social media’s future. 2024-05-20T00:00:00+0000 Guy Aridor, Rafael Jiménez-Durán, Ro'ee Levy, Lena Song 6fb35f8d-0e44-43ca-b3b9-b50423fe4406 VoxEU Column Global economic fracturing and shifting investment patterns: A diagnostic of ten FDI trends and their development implications The effects of economic fracturing are intertwined with broader, longer-term shifts in trade, investment and global value chains. In many respects, the impact of these longer-term trends on foreign direct investment outweighs – at least for now – the impact of fracturing. This column highlights ten transformative trends in foreign direct investment spanning the two decades from 2003 to 2023. Taken together, these trends have far-reaching consequences for international production patterns and for the global value chain-based and FDI-based industrialisation strategies of developing countries. 2024-05-19T00:00:00+0000 Bruno Casella, Richard Bolwijn, Francesco Casalena a7930893-4ce6-4ccb-9bdc-5bb461791de3 VoxEU Column European firms facing geopolitical risk: Evidence from recent Eurosystem surveys Recent geopolitical tensions have been putting pressure on international supply chains. This column presents the findings from recent surveys conducted by central banks of the Eurosystem which suggest that firms’ exposure to critical inputs produced in China remains elevated, especially in Germany. Many companies are implementing de-risking strategies to reduce this dependency, mainly by substituting Chinese suppliers with others located within the EU. In the event of escalating tensions leading to barriers to trade and foreign investments between China and the West, a large share of European companies would be impacted, mainly through an increase in uncertainty and disruptions to trade. 2024-05-18T00:00:00+0000 Irina Balteanu, Marco Bottone, Alejandro Fernández-Cerezo, Demosthenes Ioannou, Ambre Kutten, Michele Mancini, Richard Morris b01ec899-6f72-47c5-a40c-17fb36dbd9cd VoxEU Column Electrifying equality: How electricity adoption boosted inclusive growth in early 20th century Sweden When new general-purpose technologies like AI emerge, both techno-optimists and techno-pessimists predict that inequality will increase among the labour force. This column studies the rapid introduction of electricity in early 20th century Sweden and its effect on workers. The transformative technology benefitted those at the bottom of the income distribution, resulting in higher incomes, lower inequality, and new occupations accessible to workers with only a primary education. However, it is important to invest in high-quality basic education and skills development to ensure that workers can adapt to and benefit from technological change. 2024-05-17T00:00:00+0000 Jonathan Jayes, Jakob Molinder, Kerstin Enflo 0ef18631-9f46-4688-a7a4-2cda7f1e8a5a VoxEU Column Reducing bureaucratic hassle in Ukraine A reform removing the need for businesses to use a company seal when dealing with government agencies means ‘signed, sealed and delivered’ has become ‘e-signed’ in the case of Ukraine, saving businesses from bureaucratic hassle. This column describes how this example of reducing the burden on entrepreneurs goes along with wider administrative reforms in decentralising government activity and shows resolve to create a more dynamic economy in the aftermath of the war. 2024-05-17T00:00:00+0000 Simeon Djankov, Anastasiia Golovchenko b76886d4-d8a0-4717-88d3-4db0b4d0f745 VoxEU Column How fake news shapes the business cycle Fake news threatens our electoral process and our social structure. Fabrice Collard tells Tim Phillips that it threatens economic stability too, and that the impact of the of the fake news epidemic can be detected as a rise in uncertainty that transmits to core economic statistics. 2024-05-16T23:00:00+0000 46234e3e-f73b-4703-ac76-e44177779581 VoxEU Talk Global gender gaps may never close on their own Despite progress in recent years, there appears to be no imminent prospect of gender equality. Based on data on labour force participation over the last 30 years, this column argues that, on current trends and policies, gender gaps should narrow but are unlikely to close. Preventing reversals or setbacks and accelerating reforms are necessary to decisively close gender gaps and unleash the benefits of female economic empowerment. 2024-05-16T00:00:00+0000 Alejandro Badel, Stefania Fabrizio, Rishi Goyal 4f4dab7e-92f1-4586-bfbe-87e378e243c9 VoxEU Column The transition to illiberal democracy: A new eBook In the wake of recent political shifts, democratic principles are being eroded, giving way to a consolidation of governmental power through autocratic means. A new CEPR eBook sheds light on the trend for regime change towards autocracy, exploring the mechanisms employed by regimes to consolidate power and their consequences. 2024-05-15T23:00:00+0000 Assaf Razin 8bb9f3e5-5fe8-40e9-8aa4-82f8ec7080d5 VoxEU Column Why oil import restrictions hurt Russia more than the price cap Sanctions in response to the invasion of Ukraine led to a substantial decline in Russia’s crude oil revenues in 2022 and 2023. This column argues that the decline in revenue was due almost entirely to the embargo on Russian crude oil imports, which forced Russian oil exports to be redirected from Europe to more distant customers in Asia and conferred market power on India and China. In contrast, while a price cap deprived Russia of financial resources that were spent on additional tanker purchases, its effect on the Russian oil export price was negligible. The findings demonstrate the importance of considering economic realities when desgning sanction regimes. 2024-05-15T23:00:00+0000 Lutz Kilian, David Rapson, Burkhard Schipper 13d5477d-b7db-4a1c-b0ed-1316c7c9657d VoxEU Column Influence of nature-related risks on loan pricing and the financial sector Biodiversity losses pose risks not only to environmental health but also to global financial stability. This column examines the propagation of nature-related transition risks from international borrowers to European lenders. Using a database of international borrowing firms that receive funds from European lenders in the syndicated loan market, the authors find that the level of exposure varies across countries, with Germany, France, Luxembourg, Netherlands, Spain, and the UK being the most exposed. The pricing of syndicated loans is influenced by the level of nature-related risk faced by borrowing firms, implying that lenders charge a premium to account for the risk associated with biodiversity exposure. 2024-05-15T00:00:00+0000 Annette Becker, Erica Francesca Di Girolamo, Caterina Rho 135278c9-7e4a-42c7-9298-5088c467f42b VoxEU Column Dominant currency pricing in international trade of services The US dollar is the dominant vehicle currency for global goods trade, but there is less evidence for trade in services. This column uses a novel firm-level dataset of Portuguese firms to study the currency choice for international trade in services. Larger firms, and firms with greater exposure to foreign currency imports, are more likely to use a foreign currency for their services exports. Furthermore, the US dollar has a lower prevalence in services trade compared with goods trade. These differences have important policy implications, for example as economies diversify their exports to services. 2024-05-15T00:00:00+0000 João Amador, Joana Garcia, Arnaud Mehl, Martin Schmitz 88c26a24-3559-4a10-9f05-2ab03e5debe5 VoxEU Column What should business schools teach about the climate crisis? If economics and finance are the key to creating a sustainable way to live, what is the role of business schools in training the people who will make that happen? Alissa and Tim talk to Peter Tufano of Harvard Business about how they should be taking the lead in teaching the tools of climate finance. They also discuss his research into what the public thinks the role of business in society should be – and how that has diverged from what business schools teach. 2024-05-14T23:00:00+0000 0688b9ba-234e-4e6f-ab2d-15227fd30442 VoxEU Talk How geopolitics is changing trade There has been a rise in trade restrictions since the US-China tariff war and Russia’s invasion of Ukraine. This column explores the impact of geopolitical tensions on trade flows over the last decade. Geopolitical factors have affected global trade only after 2018, mostly driven by deteriorating geopolitical relations between the US and China. Trade between geopolitically aligned countries, or friend-shoring, has increased since 2018, while trade between rivals has decreased. There is little evidence of near-shoring. Global trade is no longer guided by profit-oriented strategies alone – geopolitical alignment is now a force. 2024-05-14T00:00:00+0000 Costanza Bosone, Ernest Dautović, Michael Fidora, Giovanni Stamato 4c20b83f-ad90-4ebe-97ca-d7e8565ff92a VoxEU Column How zero-risk weights on sovereign debt can lead to capital misallocation Financial institutions, especially in Europe, hold a disproportionate amount of domestic sovereign bonds on their balance sheets. This home bias is facilitated by regulation that allows banks to assign a zero-risk weight to sovereign debt issued by any EU country. This column argues that the zero-risk weight policy leads to capital misallocation and a significant reduction in household welfare. The misallocation has become more severe due to the increased fiscal spending following the COVID-19 pandemic. Current forecasts of debt-to-GDP ratios portend additional fiscal stress over at least the next decade. Reassuringly, positive risk weights can reduce capital misallocations. 2024-05-13T00:00:00+0000 Takuji Fueki, Patrick Hürtgen, Todd Walker 8bf8000e-4cc5-495a-b986-86a87b27545e VoxEU Column COVID-19 policy support and firm productivity in retrospect The strict measures to contain the spread of COVID-19 called for a quick governmental response. This column highlights how the allocation of support across firms during the pandemic evolved over time. During the acute phase in 2020, policy support reached medium- and high-productivity firms, and therefore did not distort the efficient allocation of resources. In the second year of the pandemic, the earlier exit of high-productivity firms from the supporting schemes resulted in a weaker correlation between productivity and support received, with relatively more employment subsidies allocated to low-productivity firms. These findings validate earlier calls for the timely withdrawal of support. 2024-05-13T00:00:00+0000 Tibor Lalinsky, Paloma Lopez-Garcia f8b2f85a-9d90-40c6-b3d7-3289b3430e24 VoxEU Column The role of imported R&D services and immigrant researchers in firm growth: Evidence from Denmark Firms increasingly rely on immigrant researchers or imported R&D services for innovation. This column argues that these sources of foreign ideas play a pivotal role in firm growth. Drawing on administrative data from Denmark, the authors show that firms employing immigrant researchers or imported R&D services see higher productivity growth than other firms, and that access to both sources of foreign ideas is crucial to a firm’s decision to engage in R&D. Incorporating the role of foreign ideas in firm R&D substantially amplifies the inferred economic effect of R&D subsidies. 2024-05-12T00:00:00+0000 Jingting Fan, Eunhee Lee, Valerie Smeets aacc6d7d-2884-4186-be98-3a8fce4ab72f VoxEU Column Firms’ debt structure matters for monetary policy transmission Since the 2008 global financial crisis, firms’ funding patterns have changed, with a shift towards more market-based finance with active issuances of debt securities by non-financial corporations. This column uses French data to investigate the implications of firms’ debt structure for the transmission of monetary policy to investment. Interest rate policy has a stronger impact on firm investment when the firm is more reliant on bank loans, while monetary policies that increase liquidity in bond markets, such as quantitative easing, have a stronger effect when firm financing is more market-based. 2024-05-11T00:00:00+0000 Marie Alder, Nuno Coimbra, Urszula Szczerbowicz 4e3b48dd-306e-4ff8-9861-6d61d8342cf5 VoxEU Column Commodity prices and the global financial cycle The US and China's economic rebound has fueled global growth and put upward pressure on commodity prices, while geopolitical risks are increasing the volatility of prices. This column reveals the significant impact of export price fluctuations, driven by idiosyncratic events in commodity markets, on the business cycles of emerging markets and developing economies. It also highlights that the endogenous reaction of commodity prices to global shocks is a key component of the international transmission of the drivers of the global financial cycle. 2024-05-11T00:00:00+0000 Luciana Juvenal, Ivan Petrella 2e3609b3-8829-4d97-babd-c84a8558902b VoxEU Column The strength of monetary policy in emerging markets Monetary policy is often feared to have limited traction in emerging markets. Yet, empirical evidence supporting or disproving these concerns is scarce. This column constructs novel monetary policy shocks based on analysts’ forecasts of policy rate decisions. Critical for the identification of the shocks, analysts can update their forecasts up to the time of the monetary policy meeting to incorporate any information deemed relevant to the interest rate decision. Using these shocks, the authors find that monetary policy in emerging markets wields considerable influence on financial and macroeconomic conditions, with a particularly pronounced impact on leveraged firms. 2024-05-10T00:00:00+0000 Ariadne Checo, Francesco Grigoli, Damiano Sandri fb667c93-8e9c-49c1-9f94-514bb184cc88 VoxEU Column When did Argentina lose its mojo? There are recurrent debates about the ongoing underperformance of Argentina’s economy. This column proposes a metric to characterise and date Argentina’s divergence from a benchmark group of countries with comparable initial incomes per capita. The authors find Argentina’s divergence to be longer than usually conjectured, with marked tranches in the first half of the 20th century and the post-WWII period. They identify specific dates for the inflection points, discuss the context in each case, offer an explanation for the enduring divergence, and describe Argentina’s volatile chapter since the 1990s. 2024-05-09T00:00:00+0000 Sebastian Katz, Eduardo Levy Yeyati 4b07dedf-4e0e-477f-80be-6452630ffe0b VoxEU Column Non-bank financial intermediation: Research, policy, and data challenges Non-bank financial intermediation has grown rapidly since the global financial crisis, and its size now equals that of banks in many countries. This column reviews research and policy work on this form of financial intermediation from a financial stability perspective. Research has documented the benefits relating to its specific comparative advantages in maturity and liquidity transformation; its specialisation and ability to finance riskier but more productive segments; its greater allocational efficiency relative to banks, at least for some types of investments; and its risk-pooling and diversification gains for final investors. But non-bank financial intermediation comes with its own risks relating to interconnections and interactions between liquidity and leverage. 2024-05-09T00:00:00+0000 Stijn Claessens dae3a1b1-8637-4707-abf6-eadfe8fac51a VoxEU Column Elections and devaluations An unprecedented number of voters will go to the polls globally in 2024. It has long been noted that incumbents tend to engage in expansive fiscal (and where possible monetary) policy in the run up to elections in order to buoy the economy and therefore their electoral prospects. This column extends this concept to look at exchange rates and finds that currencies frequently depreciate following an election as the incumbent’s efforts to overvalue the currency in the run up to the election are unwound and the new government comes to terms with depleted reserves and current account woes. 2024-05-08T00:00:00+0000 Jeffrey Frankel c944ccb1-790c-42a7-96d9-04ffd0bb2215 VoxEU Column Consumers regard the cost of money as part of the cost of living Economists typically rely on unemployment and inflation rates to gauge how consumers feel about the economy. This column examines why consumer sentiment in the US remained depressed in 2023 despite low unemployment and falling inflation, and finds that increasing borrowing costs can explain much of this gap. The cost of money is not included in traditional price indexes, indicating a disconnect between the measures favoured by economists and the effective costs borne by consumers. The authors develop alternative measures of inflation that include borrowing costs and can account for almost three quarters of the gap in US consumer sentiment in 2023. 2024-05-07T00:00:00+0000 Marijn Bolhuis, Judd Cramer, Karl Oskar Schulz, Lawrence H. Summers 75f71436-c8ab-4382-912a-c2f37f2be041 VoxEU Column European economic security in an age of interdependence COVID-19 and the subsequent supply chain congestion, the wake-up call over the dependency of Europe on Russia for energy, and geopolitical shifts and the increasingly adversarial tone of the US-China relationship have underscored the need for a comprehensive reassessment of the EU's economic security strategy. The second Paris Report examines where Europe is vulnerable and where and how it should de-risk. While the new global geoeconomic map may necessitate an EU pivot towards economic security, this must not become an excuse for protectionism, and it must preserve international cooperation. This requires innovative policy instruments, joint preparedness, contingency planning, and stronger governance mechanisms at both the EU and the international level. 2024-05-06T00:00:00+0000 Jean Pisani-Ferry, Beatrice Weder Di Mauro, Jeromin Zettelmeyer 1723bcd3-7f9a-46ca-a382-b7dc34b6321c VoxEU Column Europe's Economic Security Where is Europe’s economy vulnerable, and how can it manage that risk? A new joint report from CEPR and Bruegel investigates the challenges to economic security for Europe in the face of recent supply chain vulnerabilities and geopolitical shocks. Jean Pisani-Ferry is one of the editors of the report, and he talks to Tim Phillips about what has changed for Europe, and how we should respond. 2024-05-06T00:00:00+0000 77a1f567-6dee-4bdd-a746-51e320b4a7ba VoxEU Talk Savings responses to increasing retirement ages Facing pressures from population ageing, many countries are reforming their social security systems, including by increasing retirement ages. This column provides new evidence on the employment and savings impacts of a reform in Denmark that increased retirement ages. It finds that the reform led to postponed retirement and the accumulation of more retirement savings. These results are explained by inertia in savings behaviours and quasi-mandatory contributions to employer retirement accounts. People affected by the reform worked longer and continued to save for retirement during this period of extended employment. 2024-05-06T00:00:00+0000 Jonathan M. Leganza, Esteban García-Miralles 33695436-1ef0-43fd-b9ec-f34c415a2b3b VoxEU Column Austerity and climate (in)action In the wake of the 2008 global financial crisis, many governments implemented austerity policies aimed at reducing budget deficits through public spending cuts. This column examines the rollout of programme awarding grants for home energy efficiency upgrades in the UK examine the extent to which cuts to local government finances may have impacted efforts to promote climate action. The findings suggest that austerity, combined with poor digital skills, undermined local authorities’ efforts to effectively carry out a climate action policy that was centrally planned but locally administered. 2024-05-04T23:00:00+0000 Immanuel Feld, Thiemo Fetzer 11f908b6-0c2c-4473-8e53-c4af93f1be42 VoxEU Column Understanding return intentions and integration of Ukrainian refugees Little is known about how refugees’ intentions to return change over time, how intentions predict actual return, and how they are affected by conflict in their home regions. This column uses survey data to examine the case of Ukrainian refugees across Europe. Initially, Ukrainian refugees have a strong desire to return home, and their plans strongly predict actual return. Over time, fewer refugees say they would return when it is safe to do so. The liberation of their home district significantly increases the likelihood of an individual returning home, while more intense conflict in the home municipality makes refugees more likely to plan to settle outside Ukraine. 2024-05-03T23:00:00+0000 Joop Adema, Cevat Giray Aksoy, Yvonne Giesing, Panu Poutvaara f93924f5-d005-44fd-bd57-56b3fec86811 VoxEU Column Globalisation and profitability of US firms The significant reduction in trade barriers along with rising US firm markups in the early 2000s may seem puzzling at first. To explain these trends, this column argues that lower trade barriers allowed US firms to enter new markets and utilise their intangible assets to boost profitability. Consistent with this hypothesis, it shows that foreign profitability of US firms increased by much more than domestic profitability. Importantly, higher foreign profitability does not necessarily imply foreign customers are worse off if they are able to access the knowledge and know-how of US firms. 2024-05-03T00:00:00+0000 Bullipe R. Chintha, Ravi Jagannathan, Swaminathan Sridharan 58f93fc9-f6fd-4999-8203-315e42f88c0f VoxEU Column Clearing the path to growth When a conflict ends, we know how minefields continue to destroy the lives of innocent people. But is there an economic, as well as a humanitarian, benefit to demining? Mounu Prem of Einaudi Institute for Economics and Finance is one of the authors of a paper that provides the first estimates of the economic dividend when a minefield is cleared, using records from humanitarian operations in Colombia. He talks to Tim Phillips. 2024-05-02T23:00:00+0000 14c47e96-a3fc-46f2-b811-2d3dcdfbada0 VoxEU Talk Should AI stay or should AI go: The promises and perils of AI for productivity and growth There is considerable disagreement about the growth potential of artificial intelligence. Though emerging micro-level evidence shows substantial improvements in firm productivity and worker performance, the macroeconomic effects are uncertain. This column argues that the promise of AI-related economic growth and social welfare hinges on the rate of adoption and its interplay with labour markets. Policies should focus on both domestic and global governance issues – including threats to market competition and increased inequality – and do so rapidly to keep pace with fast-evolving AI. 2024-05-02T00:00:00+0000 Francesco Filippucci, Peter Gal, Cecilia Jona-Lasinio, Alvaro Leandro, Giuseppe Nicoletti 325c2776-6348-4217-b59f-242917341878 VoxEU Column The geography of EU discontent and the regional development trap Political discontent has been on the rise across Europe. This column draws on the concept of regional 'development traps' to examine the complex relationship between regional economic stagnation and increasing Euroscepticism within the EU. Regions mired in long-term economic decline, with limited economic prospects and a declining standard of living compared to more prosperous regions, are ensnared in a cycle of deep political discontent and are driving the rise in support for Eurosceptic parties. Addressing these economic disparities is essential for reducing Eurosceptic sentiments and ensuring the cohesion of the European project. 2024-05-01T00:00:00+0000 Andrés Rodríguez-Pose, Lewis Dijkstra, Hugo Poelman 159fdebe-dd83-4289-9636-75237d7164b2 VoxEU Column How and why work-from-home rates differ across countries and people The COVID-19 pandemic significantly accelerated the shift to work from home around the world, but with significant cross-country variations. This column explores how factors such as lockdown stringency, population density, and individualism affected the adoption of working from home across 34 countries. Individualism has the strongest association with work from home, followed by lockdown stringency and population-weighted density. Lockdown stringency and population-weighted density yield statistically significant estimates only for women. In the US, local population density has the greatest effect on work from home. 2024-05-01T00:00:00+0000 Cevat Giray Aksoy, Jose Maria Barrero, Nicholas Bloom, Steven Davis, Mathias Dolls, Pablo Zarate 5b5935c0-d5ca-427b-b260-931dc3732231 VoxEU Column Changing central bank pressures and inflation Despite the large surge in inflation across advanced economies since 2021, long-term expectations are mostly in line with central bank targets. However, this column argues that the factors which facilitated low average inflation for decades have started to reverse. These include globalisation, de-unionisation, and a deepening of the Washington consensus including especially fiscal restraint. Using a theoretical model, supported by broad empirical evidence on changing fundamentals, it demonstrates the relationship between economic and political factors, long-run inflation, and transitions between steady states. The growing tension between central banks and democratically elected politicians can make low and stable inflation more difficult to achieve in the future, with negative consequences for economic activity. 2024-04-30T00:00:00+0000 Hassan Afrouzi, Marina Halac, Kenneth Rogoff, Pierre Yared b216bc01-4a2b-4f6e-8e56-b5fe202ab358 VoxEU Column The promises and pitfalls of a green supply chain Global supply chains are central to economic policy debates. This column examines recent attempts to regulate climate sustainability within supply chains. By analysing the corporate climate action and governance practices from a global sample of firms, the authors find increasing customer pressure on suppliers to decarbonise, but no evidence that emissions or energy inputs decrease when suppliers adopt climate policies in response to customer pressure. This policy-outcome gap illustrates the problem of greenwashing, which the authors suggest could be corrected by establishing better commercial terms in supply chain contracts. 2024-04-29T23:00:00+0000 Swarnodeep Homroy, Asad Rauf 6b8413f4-da23-4a56-8bd9-dcaa3652ffc1 VoxEU Column Transformation of activities and risks between bank and non-bank financial intermediaries Non-bank financial intermediaries have surpassed banks as the largest global financial intermediaries, yet they remain lightly regulated. This column argues that the intermediation activities and risks of non-bank financial intermediaries and banks have become intricately intertwined and should not be thought as operating in parallel or as substitutes. Examples of this transformation include corporate and mortgage loans, short-term funding, and contingent funding activities, as well as the growth of bank loans to such intermediaries. Regulation should therefore adapt from a focus on banking sector systemic risks to a nexus of non-bank financial intermediary-bank systemic risk. 2024-04-29T00:00:00+0000 Viral Acharya, Nicola Cetorelli, Bruce Tuckman 4c32e87a-c7ff-4058-890e-812145d4bbb9 VoxEU Column Open science as a means for development aid: Fostering scientific research and innovation Access to existing work and technical information is key to the emergence of new scientific knowledge and innovation. But access to academic publications is particularly problematic for scientists based in developing economies that often lack the necessary resources. This column examines The Research4Life initiative, which aims to increase the availability of academic resources in eligible countries. The authors find a positive impact on local science and innovation in terms of research volumes and number of clinical trials from from the initiative, though evidence of spillovers in the form of an increased number of patents is more limited. 2024-04-28T00:00:00+0000 Alexander Cuntz, Frank Mueller-Langer, Alessio Muscarnera, Prince C. Oguguo, Marc Scheufen d3199dcb-4c3d-43dc-9ae7-ecae72a4f619 VoxEU Column Unlocking efficiency: Optimal monetary policy when capital misallocation matters The design of monetary policy has traditionally considered aggregate total factor productivity as an exogenous variable over which the central bank has no control. This column argues that monetary policy can affect aggregate productivity through the allocation of capital. In the face of an expansionary monetary policy shock, firms with a high marginal product of capital increase their investment relatively more than firms with a low marginal product of capital, leading to better overall allocation of capital, and thus productivity. This finding suggests that central banks should take account of the broader implications of their decisions for the supply side of the economy. 2024-04-27T00:00:00+0000 Beatriz González, Galo Nuño, Dominik Thaler, Silvia Albrizio 8a1d1c07-f3ce-4e02-85af-4f5057e72ac3 VoxEU Column Sailing through storms: The fallout of Red Sea disruptions for global trade and inflation Attacks by Houthi rebels in the Red Sea are jeopardising trade in a crucial maritime shipping route. This column discusses the consequences for oil prices, trade, and inflation, and looks at the effects of more protracted disruptions. Overall, shipping disruptions have had muted effects on trade and inflation. The economic effects are likely attenuated by current conditions characterised by spare capacity in global shipping, little port congestion, subdued global demand, and the adequate stock of inventories. Even if disruptions escalate and are protracted until the end of 2024, the effects on trade and inflation are modest. 2024-04-26T00:00:00+0000 Maria Grazia Attinasi, Lukas Boeckelmann, Lorenz Emter, Massimo Minesso Ferrari, Rinalds Gerinovics, Vanessa Gunnella, Baptiste Meunier, Roberta Serafini f3ca1fb4-27b1-4d8a-aec6-f9e65070fe58 VoxEU Column The impact of higher interest rates on UK firms Firms across many advanced economies have faced a significant increase in the interest rates paid on borrowing and received on deposits since 2021. This column uses new data from the UK to study how higher interest rates are impacting their sales, employment, and investment decisions. By the third quarter of 2023, firms report that higher interest rates had lowered investment and employment by 8% and 2%, respectively. This reflects both the direct impact through the higher cost of capital, as well as indirect impacts through reduced demand. Firms which are most reliant on external financing to fund investment report the largest decreases in both investment and employment as a result of higher interest rates. 2024-04-26T00:00:00+0000 Krishan Shah, Nicholas Bloom, Philip Bunn, Paul Mizen, Gregory Thwaites, Ivan Yotzov cce89038-4b15-4fe1-b05d-57ce3797573c VoxEU Column How quickly should we adopt AI? In March 2023, many experts supported an open letter that called for a six-month pause in giant AI experiments, and that development of these AIs should go ahead “only once we are confident that their effects will be positive, and their risks will be manageable”. In the second of our podcasts recorded at the 79th EP Panel, Tim Phillips asks Joshua Gans of the University of Toronto what might happen if we did pause AI adoption, and whether we should instead accelerate adoption of AI so that we can more quickly learn about its benefits and harms, and design better regulation as a result. 2024-04-25T23:00:00+0000 39ec6653-5a69-4ba7-93b2-9ad3886f32df VoxEU Talk Using the returns of frozen Russian assets to finance the victory of Ukraine In addition to more weapons and ammunition, Ukraine also needs money to win the war against Russia. EU leaders have proposed to transfer some €3 billion in incomes from the excess profits from managing frozen Russian assets this year to the European Peace Facility. This column argues that this money should instead be used to finance borrowing by Ukraine’s partners, with the proceeds of this borrowing put in a fund that is available in a predictable manner and at a scale that matters. The fiscal costs to the borrowing countries would be net zero, while Ukraine would gain significantly in terms of macroeconomic stability. 2024-04-25T00:00:00+0000 Torbjörn Becker, Yuriy Gorodnichenko 06ed9dc9-2d4f-42e8-b71a-9935758ba0f0 VoxEU Column Migration and employment dynamics across European regions Despite extensive research on the labour market effects of immigration, little is known about the dynamic effects of immigration on native employment or the role of institutional factors or economic performance in shaping these effects. This column makes use of regional differences across multiple countries in Europe to reveal an intricate and diverse impact of immigration on native employment. While the employment impact of immigration can be negative in the short run, it diminishes over time. Furthermore, the employment response to immigration varies considerably by educational level and place. These results highlight the importance of adopting a nuanced and targeted approach to immigration policies, including mitigating any potential short-run adverse labour market effects on low-educated workers and economically lagging regions. 2024-04-25T00:00:00+0000 Anthony Edo, Cem Ozguzel dbd134e4-1d7f-4873-98f7-78c7199d2b1b VoxEU Column Cool cities: The value of urban trees Cities are warming faster than their rural surroundings. But the ecosystem support provided by urban forestry is often omitted from climate policies due to the difficulty in assigning to it a credible monetary sum. This column estimates the value of urban trees. By exploiting an ecological catastrophe – an infestation of exotic beetles in the trees of Toronto, Canada – the authors are able to quantify the ecological and economic value of urban forestry, providing detailed evidence that a city’s trees reduce energy consumption and moderate temperatures during heatwaves. 2024-04-24T23:00:00+0000 Lu Han, Stephan Heblich, Christopher Timmins, Yanos Zylberberg 014891b9-c213-4f78-a1b3-66656a86fc05 VoxEU Column The impact of exchange rates on Japan’s machinery exports since 1990 Japan produces and exports a sophisticated basket of machinery and capital goods. Following the global crisis, it offshored manufacturing of parts and components to Asian countries. This column studies the impact of exchange rate fluctuations on Japanese exports since 1990. It finds a strong effect between 1990 and 2010, when an appreciation of the yen by 10% would reduce machinery exports by 6%. However, since 2010, total machinery exports are less sensitive to exchange rates, particularly exports to Asian countries. However, a depreciating yen boosts the profitability of Japanese manufacturers and their exports to non-Asian countries. 2024-04-24T00:00:00+0000 Willem Thorbecke df9e2e21-4075-46e3-877a-a083b878aff0 VoxEU Column Using spatial integrated assessment models to understand the local and global economic impact of climate change Climate change is a spatial phenomenon. While it will be very costly at equatorial latitudes, where it is already very hot, it will have more benign effects at northern latitudes, where temperatures today are too cold to foster large concentrations of people and economic activity. This column discusses recent advances in the development of spatial integrated assessment to analyse the economic impact of global warming. The authors find that while important progress has been made in developing dynamic climate assessment models, much work remains to be done. 2024-04-23T23:00:00+0000 Klaus Desmet, Esteban Rossi-Hansberg 8aba7560-2e95-4330-9b30-110d122f2170 VoxEU Column Co-authorship in economics in the aftermath of MeToo The MeToo movement increased awareness around issues of gender discrimination in the workplace. This column studies the movement’s impact on co-authorship in economics by analysing working papers published between January 2004 and December 2020. The authors find significant changes in the collaborative landscape of economists, particularly evident in a surge of new partnerships across genders. But the findings also unveil a decline in collaborations outside authors’ existing networks – a decline that was especially pronounced for senior scholars, who initiated substantially fewer new collaborations with junior women. 2024-04-23T00:00:00+0000 Noriko Amano-Patino, Elisa Faraglia, Chryssi Giannitsarou dc777936-a089-49bc-a540-2d066bdee2b3 VoxEU Column