Since the Global Crisis, prudential instruments to address financial stability concerns have been enhanced and broadly adopted across countries. Using the recently updated International Banking Research Network Prudential Instrument database, this column shows that by 2023 most of the 64 countries considered have implemented most of the instruments. During the 2021-2023 inflation episode, cyclical prudential […]
History suggests that using lax monetary policy and a weaker currency to address debt sustainability is a dangerous game. This column revisits a unique early experiment with a managed float of state-issued money in Venice between 1619 and 1666. Newly digitised exchange rate data show that even for a government with a strong fiscal reputation, […]
The euro area faces persistently weak productivity growth alongside a sustained trade surplus and a trendless real exchange rate. This column shows that persistent productivity growth differentials relative to the rest of the world are a key driver of Europe’s external surplus. Structural trade shifts, such as declining home bias and falling import prices, have […]
Governments and development institutions spend billions to help small businesses access financing, hoping this will create jobs and support inclusive economic growth. But we don’t really know if these programs reach the firms that need help most and help them grow. In a recent paper, we evaluate a loan program in Ecuador implemented by the state […]
Within minutes of the result of the 2024 US presidential election becoming clear, it triggered a global tremor in currency markets. This column investigates how institutional quality shaped currency responses to the election, using high-frequency exchange rate data for 73 countries. Virtually all currencies depreciated against the dollar immediately following the election result, which markets […]
The current US administration’s approach to financial markets and institutions mixes familiar deregulatory policies with a range of other policies that are largely without precedent. This column, taken from a CEPR book on the economic consequences of the second Trump administration, catalogues the relevant policy shifts that are likely to affect the financial sector and […]
Industrial policy is increasingly implemented worldwide, with many policymakers and researchers highlighting its benefits. However, the cost of industrial policy remains less understood. Using Chinese firm-level data, this column shows that higher industrial subsidies raise the likelihood and severity of foreign anti-dumping and countervailing duties at each investigation stage. These retaliatory tariffs wipe out roughly […]
As large language models gain traction, it is important to ensure that decisions delegated to them comply with ethical and legal principles. This column reports on an experiment in which state-of-the-art large language models were prompted to impersonate the CEO of a fictitious financial firm needing to repay corporate debt urgently with no funds available […]
Commodity price spikes at the outset of Russia’s full-scale invasion of Ukraine contributed significantly to global inflation in 2022-23, which caught many policymakers off guard in both its intensity and persistence. This column uses a nonstationary competitive storage model to demonstrate that, beyond the temporary surge, the war-induced reduction in Ukraine’s acreage caused an upward […]
The new US administration has made the Federal Reserve’s monetary policymaking more complicated both because of the elevated uncertainty regarding administration policies and because of the extraordinary political pressure put on the central bank. This column describes how, thus far, the Fed has followed a cautious path for policy, waiting for more information on policy […]
