Forecasts from professionals (economists, analysts, brokers, academics) are a key input into economic decision-making. This column highlights that professional forecasts are ‘lumpy’, often remaining unchanged for several periods, before shifting in large, infrequent jumps. It argues that this reflects ‘rational inaction’, as frequent adjustments or constant swings could undermine credibility. It suggests a natural distinction […]
On 2 April 2025, the US announced tariffs on most of its trading partners, creating a major trade policy shock to the world economy. This column shows that the US dollar depreciated on impact, rather than appreciating as expected based on standard theory and prior evidence. The authors argue that this unusual transmission impact of […]
Economic historians widely acknowledge that historical price data are measured with error. This column collects pre-WWI inflation data from 15 countries and uses instrumental variables to estimate inflation persistence that is unaffected by measurement error. It finds that the persistence of inflation is much stronger than previously estimated when accounting for measurement error, but still […]
Emerging markets with partially dollarised financial systems are particularly vulnerable to global financial cycles. This column examines how reserve requirements on foreign currency deposits can help mitigate credit booms induced by capital inflows. Focusing on Peru between 2008 and 2017, the authors combine microdata with a calibrated macro model to show that foreign currency reserve […]
Adapting to climate change – finding ways to prevent the harshest effects or deal with crises when they occur – is a first-order issue. But research on the economics of adaptation has offered little guidance for policy. This column reviews the existing literature on adaptation and considers how it can more directly inform policy design […]
The inflationary episode from 2021 to 2023 reignited the debate on the nonlinearity of the Phillips curve. Aggregate and city-level data indicate a non-linear relationship, with inflation accelerating rapidly when the vacancy-unemployment ratio exceeds one. This column argues that the evidence for a non-linear Phillips curve is fragile and depends on the model specification and […]
Cognitive skills are commonly assumed to begin deteriorating from the age of 30, which could pose a significant challenge for rapidly ageing populations. But this assumption relies largely on cross-sectional data that cannot distinguish between ageing patterns and cohort differences. Using German longitudinal data, this column finds that skills, on average, increase markedly into one’s […]
Against a backdrop of escalating geopolitical tensions and rapidly shifting global alliances, policymakers are advocating strategies such as ‘friendshoring’ to safeguard supply chain resilience. This column uses data on 700 US firms importing from 96 countries between 2007 and 2020 to show that US firms reduce imports from countries that become ideologically distant from the […]
The trade war launched by the Trump administration follows a longer-term pattern of geo-economic fragmentation, but it dwarfs all prior expectations. This column looks beyond the trade war, asking if, in a more fragmented global economy, official investors should continue to hold US federal debt to the same extent as before. The answer is likely […]
U.S. Defense Secretary Pete Hegseth has ordered the termination of several information technology services contracts valued at $5.1 billion, including companies such as Accenture, Booz Allen Hamilton and Deloitte, according to a Pentagon memo. The contracts “represent non-essential spending on third party consultants” for services Pentagon employees can perform, Hegseth said in the memo released […]
