Some consumers are over-optimistic about their future income and underestimate the probability of experiencing negative income shocks, while others have more accurate (‘rational’) beliefs. This column introduces a framework that considers behavioural and rational borrowers to assess the effects of potential regulatory interventions. Over-optimists benefit from being partially pooled with (‘cross-subsidised’ by) rational borrowers. Small-scale […]
Europe’s labour productivity gap with the US has widened since the mid-1990s and again since the Covid pandemic. This column uses comprehensive cross-country firm-level and sector-level data to trace the roots of Europe’s productivity problem. It shows that productivity growth of Europe’s large leading firms has been trailing that of US counterparts. Young firms in […]
As governments worldwide grapple with labour shortages and systemic budget shortfalls, the question arises of how unemployment insurance policies potentially contribute to this imbalance by increasing and extending nonemployment. This column argues that recent debates around unemployment insurance reform, which often focus on the effect among job seekers, overlook potential unintended consequences among the employed. […]
Though ‘buy now, pay later’ loans are increasingly popular, critics argue that they encourage high costs and unsound borrowing. This column examines how such services influence conventional bank credit markets. Using loan-application data from a Nordic bank that also provides both traditional consumer loans and ‘buy now, pay later’ – allowing applicants’ creditworthiness to be […]
Germany’s manufacturing sector has struggled since 2021 due to rising energy costs, weak global demand, and a declining automotive industry. This column describes how higher gas consumption in energy-intensive industries, trade fragmentation, and competition from China have hit Germany harder than other euro area economies, and shows that shocks in German industry significantly impact neighbouring […]
The discussion of the monetary policy response to climate change has typically focused on whether central banks should take action and what types of adjustments they could make, with comparably less focus on the practical challenges in making such adjustments. This final column in a three-part series reviews some prominent examples of central banks having […]
As artificial intelligence is becoming a top priority for businesses and policymakers worldwide, understanding what makes a country competitive in AI-driven industries is crucial for ensuring success in the global economy. This column uses US import data over the period 1999–2019 to study the determinants of comparative advantage in AI-intensive industries. It shows that more […]
Another election season in Africa is behind us. Last year about 19 countries headed to the polls in presidential and legislative elections. As it is with every election, political parties seemed to promise everything to win power. But across the region there appeared to be one common thing that African youth are clamoring for—Jobs! The story of four Nigerian […]
Bangladesh has gone through several political transitions since its independence in 1971. Caretaker or interim governments in the past have often delivered important institutional reforms. The present team under Professor Mohammad Yunus is no exception. But to meet the expectations of Bangladeshis during this short window, a focused reform agenda is required. Bangladesh has come far […]
Madagascar is endowed with significant renewable energy resources and yet has one of the largest energy access deficits in the world. Only 36% of the population has access to electricity. For those who do, the service is often unreliable. The recent power cuts (load-shedding that is becoming the norm), which severely impact households and businesses, […]
