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 […]
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 […]
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 […]
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 […]
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 […]
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 […]
Teaching practices that respond to the specific needs of students and leverage their love of learning are likely to be effective, but most traditional teaching practices compel students to be passive listeners. This column explores the effectiveness of a pedagogical programme in Türkiye that nurtured children’s natural curiosity, and finds that the programme increased science […]
Price setting has become more flexible following a string of large adverse shocks. This column argues that a shift to a high-uncertainty regime incentivises firms to invest in their ability to adjust prices. Faced with higher productivity uncertainty, firms set prices more flexibly, and this gives rise to comparatively large price hikes when adverse supply […]
The natural rate of interest is key to understanding where interest rates may be heading in the medium run. This column reviews the evidence regarding natural rate dynamics after the COVID-19 pandemic. In both advanced and emerging market economies, estimates of the natural rate have edged up. This increase could be attributed to changes in […]
Divestment of polluting companies has gained traction as way for investors to incentivise the transition to a low-carbon economy. This column examines the tilting of equity portfolios to green versus brown firms internationally, and finds that investors in richer countries tend to hold relatively greener portfolios compared to investors in poorer countries. By acting as […]
