Bank lending is inherently pro-cyclical. This is because, during upswings in the business cycle, banks tend to overestimate the creditworthiness of their borrowers, often resulting in excessive credit expansion. At the same time, they rapidly cut lending during downturns. When an exogenous shock hits the economy, this reduction in the provision of bank credit may […]
In early 2020, as COVID-19 morphed into a global pandemic, countries faced multifaceted challenges: a health crisis from a poorly understood disease, a financial crisis as investors ‘dashed for cash’ and liquidity dried up, and an economic crisis as governments announced lockdowns and mobility restrictions. How did policymakers respond to these overlapping challenges? What policy […]
The economic, social, and political consequences of globalisation have been a hot topic in the public debate over the last decades. The international integration of global markets can influence many aspects of national economies – access to new markets can boost national exports, while international competition may put downward pressure on wages and displace local […]
Modern financial systems rely on safe assets. A ‘safe asset’ is defined by three characteristics (Brunnermeier et al. 2016, 2017, Brunnermeier and Huang 2018, Gorton and Ordonez 2022). First, it has a low default risk, or high asset ‘quality’. Second, like a good friend, a safe asset retains its value during bad times (‘robustness’). Third, […]
The draft European Union Data Act, proposed by the European Commission in February 2022, aims to fill a big gap in data regulation. It is intended to tackle a situation in which manufacturers design machines to give themselves exclusive access to the data those machines generate. Manufacturers can then leverage this data monopoly to sell exclusive […]
Apple’s iPhone and Google’s Android mobile operating system dominate the smartphone market. The two companies also control the app stores consumers use when downloading apps for use on their smartphones. iPhone users can download apps only from the Apple app store. Android phones, meanwhile, allow ‘sideloading’ of apps from stores other than Google Play. For […]
When it comes to encouraging fiscal discipline, euro-area policymakers want the market to be part of the solution. This will not succeed until they make peace with the idea that, while it is their job to set conditions and incentives, it is not their job to dictate prices and spreads. Within the environment that policy […]
