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Economy Climate Environment Featured

Europe’s 2040 climate target: four critical risks and how to manage them

Executive summary The European Commission has recommended that the European Union should cut greenhouse gas emissions by 90 percent by 2040 compared to 1990. Modelling shows that this target is feasible technically and is in line with social acceptability and global fairness objectives. Achieving it will require massive expansion of renewable electricity generation, drastic reductions […]

Environment Climate Economy Featured

Economic losses from climate change are probably larger than you think: New NGFS scenarios

Recent research suggests that the impact of climate change on economic output might have been underestimated in the past. This column reviews the results from various damage functions used to estimate economic losses induced by climate change. It also elaborates on the choice of damage function made by the Network for Greening the Financial System, […]

Economy Business Featured

The Medici’s quiet coup: How the wealthy bend politics without shifting institutions

The Medici family ruled Florence for nearly 300 years, patronising the arts and making Florence a cultural centre of Europe. But there was a dark side to Medici rule. This column studies the circumstances under which a relatively open political system can be corrupted by its confrontation with concentrated wealth. Without formally changing the constitutional […]

Featured Banking Finance

Impact of insolvency regimes on non-performing loans: Lessons from detailed credit data

Effective insolvency frameworks can address multiple issues in the banking sector. This column examines the impact of insolvency framework reforms on non-performing loans, using a new metric derived from the European Banking Authority’s Transparency Exercises. It finds that debtor-oriented reforms seem to be more effective in reducing the accumulation of non-performing loans, particularly benefiting larger […]

Finance Economy Featured

The housing consumption channel of mortgage demand

Many housing markets have experienced a dramatic rise in house prices and mortgage debt over recent decades that has outpaced average income growth. Increased wealth and increased collateral values have been cited as possible explanations. This column suggests that much of the increase in mortgage debt can be attributed to homebuyers being compelled to borrow […]

Technology Economy Featured

The expansion of AI will likely shrink earnings inequality

The 1980s and 1990s saw a sharp increase in earnings inequality in the US. As new technologies displaced the routine tasks typically performed by less-educated workers, more-educated workers experienced an upturn in their economic position that has endured ever since. This column argues that artificial intelligence could mitigate or even reverse this disparity between low […]

Economy Featured Technology

The macroeconomic effects of AI innovation

The recent rise of generative artificial intelligence has spurred a heated debate on its potential for economic growth and on the risks of displacing workers. This column uses US patent-level data over 1980-2019 and finds that the aggregate economy can benefit from AI-driven technological progress. Historically, an increase in AI innovation has boosted industrial production […]