Recent Popular Editors' choice   The roots of shadow banking Enrico Perotti, 21 June 2012 The ‘shadow banking’ sector is a loose title given to the financial sector that exists outside the regulatory perimeter. This column argues that despite its unpleasant sounding name, and its crucial role in the credit boom that preceded the global crisis, it does have its benefits – something that the regulators should be aware of. The Eurozone: Choked by an accounting identity Anton Brender, Emile Gagna, Florence Pisani, 21 June 2012 Is austerity in the Eurozone doomed to fail? This column argues that Eurozone governments have to acknowledge that their response to the sovereign crises has been wrong. Bringing budgets back to balance as quickly as possible and at any cost for growth is a recipe for disaster. The Eurozone’s May 2010 strategy is a disaster: Time to pay up and end this crisis Charles Wyplosz, 20 June 2012 The EZ rescue strategy adopted in May 2010 failed to restore debt sustainability, avoid contagion, or reduce moral hazard. This column argues that a volte face is needed. The debt of Greece, Portugal and Italy – and perhaps Ireland, Spain and France as well – must be restructured to restore growth and end the crisis. All EZ nations should pay since their leaders’ decision to violate the Maastricht Treaty’s no-bail out clause is what brought us here. The Rocky Balboa recovery: Is policy uncertainty holding it back? Scott Baker, Nicholas Bloom, Steven J. Davis, 20 June 2012 The on-then-off economic recovery in the US and Europe is one of the many mysteries of the post-crisis economy. This column provides some evidence that policymakers’ indecisiveness may be part of the cause. Because policymakers act decisively when things get bad and dither when things get better, corporate and consumer demand stalls just as the recovery gets going. The euro’s future begins now Pier Carlo Padoan, Urban Sila, Paul van den Noord, 19 June 2012 With Greek politics in a stalemate, the Eurozone enters yet another week of deep uncertainty over its future. This column argues that the Eurozone must set the appropriate policies now to secure its future lest it be trapped in a cycle of of falling growth and soaring debt. Eliminating a known unknown: Firm evidence on tax multipliers Karel Mertens, Morten O. Ravn , 19 June 2012 “There are known unknowns; that is to say there are things that we now know we don’t know”. So said former US defence secretary Donald Rumsfeld. He was talking about the Iraq war but in the debate over fiscal policy, one ‘known unknown’ is the tax multiplier. This column tries to make it a known known. Inflation Targeting is dead: Long live Nominal GDP Targeting Jeffrey Frankel, 19 June 2012 The current economic crisis has called into question the role of monetary policy, particularly Inflation Targeting and its oversight of asset bubbles and supply side shocks. This column is an obituary to Inflation Targeting and call for Nominal GDP Targeting to replace it. Notes for currency wars: The trilemma of international finance Michael Bordo, Owen F Humpage, Anna J Schwartz, 18 June 2012 The so-called trilemma of international finance maintains that a country cannot simultaneously peg an exchange rate, maintain an independent monetary policy, and permit free cross-border financial flows. At best, only two of the three are feasible. This column argues that despite their best efforts, countries are set to learn this lesson again and again. The implicit subsidy of banks Joseph Noss, Rhiannon Sowerbutts, 17 June 2012 A credible threat of failure is an integral part of any industry. But this does not always apply to banks as failure may result in unacceptable economic costs. As a result, unprecedented amounts of public money have been used to avert bank failure. This column explains why the subsidy arises, why it is a public policy concern, and how it can be quantified. The UK economy in a global world David Greenaway, 16 June 2012 The defiant attitude that no crisis should go to waste has understandably become more popular in recent years. This column argues that the on-going financial crises provide an important incentive for new thinking on government competitiveness and industrial policy, particularly for what to do when the crises end. Commodity windfalls help reduce debt… in democracies Rabah Arezki, Markus Brückner, 15 June 2012 Booming commodity prices generate large foreign currency inflows for exporting nations. This column argues that in countries with executive constraints and political competition windfalls from commodity booms lead to a significant reduction in external debt. In autocratic regimes, on the other hand, the windfalls are used to increase consumption expenditures. Lessons from Latvia Olivier Blanchard, 15 June 2012 Latvia was severely hit by the Global Crisis yet its adjustment has been remarkable. Four years after the hit it has one of the highest growth rates in Europe, its euro-peg has held, and the fiscal and current accounts are close to balance. This column outlines seven reasons why its adjustment has worked so well. It warns however that the lessons are not easily exportable. Preventing a Eurozone bank and bond run Catherine Dobbs, Michael Spence, 15 June 2012 Whether the Greek elections this weekend trigger the Eurozone’s first exit or not, the possibility of exit is now firmly on the table. But where are the plans for this highly complex operation that could, if mishandled, cause untold economic damage in Europe and beyond? This column, by a Wolfson Prize finalist and a Nobel Laureate, sketches the core elements of one such plan. Débâcle: The 11th GTA report on protectionism Simon J Evenett, 14 June 2012 In recent weeks official bodies such as the World Trade Organisation and the European Commission as well as leading private sector associations – the International Chamber of Commerce (ICC) and the so-called B20 group of business leaders – have made strong statements concerning rising protectionism in the run up to the G20 summit in Los Cabos, Mexico. On the basis of most extensive update to the Global Trade Alert (GTA) database, that was conducted in preparation for this, the eleventh GTA report, they were right to do so. Room for manoeuvre among Eurozone banks Claus Puhr, Stefan W Schmitz, Ralph Spitzer, Heiko Hesse, 14 June 2012 In the following column we investigate balance-sheet growth, capitalisation, and deleveraging of European banks since the end of 2008 and show that based on existing empirical evidence banks have so far reduced their leverage (i) markedly and (ii) mainly by raising capital rather than reducing exposure to the real economy. In doing so, banks were able to address two concerns at the same time: One related to their fundamental soundness (“banks are undercapitalised”), the other related to potential harm done to the economy at large (“banks are causing a credit crunch”). This is particularly important, as history has shown that deleveraging too slowly can lead to periods of stagnant growth. Banking union in the Eurozone and the EU Jacopo Carmassi, Carmine Di Noia, Stefano Micossi, 13 June 2012 Is Europe ready for a banking union? This column argues that the current debate is missing several key points. Chief among these is that much of what is needed for Europe’s financial system is already feasible within the existing set up. Spatial disparities in India: Have Mumbai and Chennai become too congested? Klaus Desmet, Ejaz Ghani, Stephen D O'Connell, Esteban Rossi-Hansberg , 13 June 2012 Will India’s rapid growth in the services sector lead to overcrowding of its cities? This column compares India’s experience to that of other countries. New preface to Charles Kindleberger, The World in Depression 1929-1939 J. Bradford DeLong, Barry Eichengreen, 12 June 2012 Charles Kindleberger’s classic book on the Great Depression was originally published 40 years ago. In the preface to a new edition, two leading economists argue that the lessons are as relevant as ever. Asia’s growth, production networks, and SMEs Ganeshan Wignaraja , 12 June 2012 Small- and medium-sized enterprises are a crucial part of trade-led growth in Asia. This column argues that tackling key constraints at firm and country level would help unlock the full potential of these companies as players in economic growth. International rules for capital controls Olivier Jeanne, Arvind Subramanian, John Williamson, 11 June 2012 Do we need international rules for capital controls? This column looks at the different regimes in countries such as Brazil and China and argues that we do.   A tale of two depressions: What do the new data tell us? February 2010 update Barry Eichengreen, Kevin H O’Rourke, 8 March 2010 This column updates the original Vox columns by Barry Eichengreen and Kevin O’Rourke comparing today’s global crisis to the Great Depression. The three previous columns have shattered all Vox readership records with over 450,000 views. This latest edition covers up to February 2010 showing that, while there is cause for optimism, there is no room for complacency. Views 718471 Educated in America: College graduates and high school dropouts James J. Heckman, Paul A. LaFontaine, 13 February 2008 Official statistics for US high school graduation rates mask a growing educational divide. This column presents research showing that a record number of Americans are going to university – while an increasing number are dropping out of high school. This poses major social challenges for the United States. Views 191569 Eurozone breakup would trigger the mother of all financial crises Barry Eichengreen, 4 May 2010 Originally posted 17 November 2007, this Vox column is more relevant than ever arguing that adopting the euro is effectively irreversible. Leaving would require lengthy preparations, which, given the anticipated devaluation, would trigger the mother of all financial crises. National households and firms would shift deposits to other Eurozone banks producing a system-wide bank run. Investors, trying to escape, would create a bond-market crisis. Here is what the train wreck would look like. Views 140278 Debt, deleveraging, and the liquidity trap: A new model Paul Krugman, 18 November 2010 Debt is the crux of advanced economies’ current policy debates. Some argue for fiscal expansion to avoid recession and deflation. Others claim that you can’t solve a debt-created problem with more debt. This column explains the core logic of a new model by Eggertsson and Krugman in which debt shocks and policy reactions can be examined. Relying on heterogeneous agents, the model naturally produces the paradox of thrift but also finds new supply-side paradoxes, those of toil and flexibility. The model suggests that most economists have been misthinking the issues and that actual policy in the US and EU is misguided. Views 102020 Five decades of evidence on financial crisis and recession: How long? How deep? Stijn Claessens, M Ayhan Kose, Marco E Terrones, 7 October 2008 The house and equity price busts on top of a credit crunch make this an unprecedented crisis for the modern US economy; its real economy effects are thus difficult to assess. This column provides insights based on evidence from 122 recessions in 21 advanced nations since 1960. Findings suggest recessions in such circumstances are much costlier and slightly longer. But the outcome can be affected by policy, and it’s high time that policymakers act swiftly and decisively. Views 98053 Subprime 'crisis': FAQs (revised & updated) Stephen Cecchetti, 15 August 2007 A revised and updated version of the 13 August column on the basic how's and why's of what the Fed has been doing to calm financial markets. Views 96041 Trade and inequality, revisited Paul Krugman, 15 June 2007 It’s no longer safe to assert that trade’s impact on the income distribution in wealthy countries is fairly minor. There’s a good case that it is big, and getting bigger. I’m not endorsing protectionism, but free-traders need better answers to the anxieties of globalisation’s losers. Views 89413 Rescuing our jobs and savings: What G7/8 leaders can do to solve the global credit crisis Barry Eichengreen, Richard Baldwin, 9 October 2008 Without rapid and coordinated action by G7/8 leaders, this financial crisis could turn into a jobs crisis, a pension crisis and much more. This column introduces a collection of essays by leading economists on what the G7/8 leaders should do this weekend. The dozen essays present a remarkable consensus on a few points: we need immediate, coordinated global action that includes recapitalisation of the banks. Views 89169 The euro could surpass the dollar within ten years Jeffrey Frankel, 18 March 2008 One of the world’s leading international economists explains how the euro could surpass the dollar as the premier international currency and examines the geopolitical implications of such a shift. Views 88520 Subprime crisis: causes, consequences and cures Carmen M Reinhart, 15 March 2008 We may just have started to feel the pain. Asset price drops – including housing – are common markers in all the big banking crises over the past 30 years. GDP declines after such crises were both large (-2% on average) and protracted (2 years to return to trend); in the 5 biggest crises, the numbers were -5% and 3 years. This column, based on the author’s testimony to the Congress, picks through the causes and consequences. It argues that when it comes to ‘cures,’ it would be far better to get the job done right than get the job done quickly. Views 87873 Slave trade and African underdevelopment Nathan Nunn, 8 December 2007 Slavery, according to historical accounts, played an important role in Africa’s underdevelopment. It fostered ethnic fractionalisation and undermined effective states. The largest numbers of slaves were taken from areas that were the most underdeveloped politically at the end of the 19th century and are the most ethnically fragmented today. Recent research suggests that without the slave trades, 72% of Africa’s income gap with the rest of the world would not exist today. Views 84334 Subprime ‘crisis’: FAQs Stephen Cecchetti, 13 August 2007 Here are the basic how's and why's of what the Fed has been doing to calm financial markets. Views 82286 How bad could the crisis get? Lessons from Iceland Jon Danielsson, 12 November 2008 Iceland’s banking system is ruined. GDP is down 65% in euro terms. Many companies face bankruptcy; others think of moving abroad. A third of the population is considering emigration. The British and Dutch governments demand compensation, amounting to over 100% of Icelandic GDP, for their citizens who held high-interest deposits in local branches of Icelandic banks. Europe’s leaders urgently need to take step to prevent similar things from happening to small nations with big banking sectors. Views 77139 Krugman’s view on the dollar Richard Baldwin, 2 October 2007 As the dollar has started to slide, the question is: how far, how fast? This column, which is based on Paul Krugman’s recent Economic Policy article suggests the answers are: pretty far and pretty fast. Views 77133 Good news at last? The recession will be over sooner than you think Nicholas Bloom, Max Floetotto, 12 January 2009 A key source of the today’s economic weakness is uncertainty that led firms to postpone investment and hiring decisions. This column, by the authors whose model forecast the recession as far back as June 2008, report that the key measures of uncertainty have dropped so rapidly that they believe growth will resume by mid-2009. This means any additional economic stimulus has to be enacted quickly. Delaying to the summer may mean the economic medicine is administered just as the patient is leave the hospital. Views 77059 Mother of all bailouts and what it means for Europe Daniel Gros, Stefano Micossi, 20 September 2008 The radical moves in the US have direct implications for European banks and indirect implications for European governments. This column discusses the likely channels and notes that several European banks are both too big to fail and may be too big to be saved by their national governments alone. Views 75367 Iceland’s banking collapse: Predicable end and lessons for other vulnerable nations Willem Buiter, Anne Sibert, 30 October 2008 In the first half of 2008, Buiter and Sibert were invited to study Iceland’s financial problems. They identified the “vulnerable quartet” of (1) a small country with (2) a large banking sector, (3) its own currency and (4) limited fiscal capacity – a quartet that meant Iceland’s banking model was not viable. How right they were. This column summarises the report, which is now available as CEPR Policy Insight No. 26 with an October 2008 update. Views 74114 Tennis, pressure and the gender wage-gap M Daniele Paserman, 26 June 2007 Female tennis players play more conservatively and commit more unforced errors when playing critical points. Does this explain the upper-echelons wage gap? Views 72048 Open Letter to European leaders on Europe’s banking crisis: A call to action Alberto Alesina, Richard Baldwin, Tito Boeri, Willem Buiter, Francesco Giavazzi, Daniel Gros, Stefano Micossi, Guido Tabellini, Charles Wyplosz, Klaus F. Zimmermann, 1 October 2008 This is a once-in-a-lifetime crisis. Trust among financial institutions is disappearing; fear may spread. Last week’s US experience showed that saving one bank at a time won’t work. A systemic response is needed and in Europe this means an EU-led initiative to recapitalise the banking sector. Unless European leaders immediately unite to address this crisis before it spirals out of control, they may find themselves fighting over how best to salvage the aftermath. Views 72036 Is the LIBOR-OIS spread due to predatory behaviour? Francesco Giavazzi, 2 June 2008 Editor's Note: Originally posted 2 June 2008. There has been a persistent spread between the rate at which banks lend each other money and government-backed securities yields in recent months. This column describes hypotheses explaining the spread – including the possibility that banks aren’t lending in order to bankrupt acquisition targets. Views 72018   The euro’s future begins now Pier Carlo Padoan, Urban Sila, Paul van den Noord, 19 June 2012 With Greek politics in a stalemate, the Eurozone enters yet another week of deep uncertainty over its future. This column argues that the Eurozone must set the appropriate policies now to secure its future lest it be trapped in a cycle of of falling growth and soaring debt. The impossible hope of an end to austerity Charles Wyplosz, 14 May 2012 With French and Greek voters rejecting austerity, politicians are once again taking the government spending debate seriously. This column argues that the voters are right – it is a bad idea to tighten fiscal policy when growth is so feeble. But the column adds that, wherever one looks, the road away from austerity looks desperately blocked. Weekend elections: Democracy and the fiscal compact Francesco Daveri , 8 May 2012 Voters in France, Greece, Italy, and Germany rewarded politicians who opposed austerity. This column argues that attempts to fulfill campaign promises will run up against a hard constraint. The countries whose voters are calling for looser fiscal policies are those where public spending rose fastest since the birth of the euro. The only way out of today’s difficulties is to use the flexibility already in the fiscal compact and continue with bold implementation of the economic reforms that are under way. The European debate on bank capital is not just about Europe Nicolas Véron, 4 May 2012 Europe’s finance ministers are currently deciding on the legislation intended to implement the Basel III international agreement on bank capital, leverage, liquidity, and risk management. This column argues that many officials, within Europe and beyond, severely underestimate the importance of this debate for reaching a global standard for financial regulation. Have the US and European economies parted company? Domenico Giannone, Jasper McMahon, Lucrezia Reichlin, Saverio Simonelli, 2 May 2012 According to official statistics, the UK and Europe are heading for recession, while the US is recovering. This has led some to suggest that European economies are moving in the opposite direction to the US. This column, written by the co-founders of Now-Casting, presents new now-casting estimates that put Europe and the US even further apart. Fiscal austerity and policy credibility Marco Buti, Lucio R Pench, 20 April 2012 Most economists agree that European economies share the need to reduce public deficits and debts. This column stresses that while gradual consolidations are in general more likely to succeed than cold-shower ones, the superiority of a gradual strategy tends to evaporate for high levels of debt and is also less pronounced for consolidation episodes following a financial crisis. The EZ breakup contest: Take ignorance seriously Richard Baldwin, 10 April 2012 The five finalists of the £250,000 EZ breakup contest were announced last week; only one has a graduate degree in economics. This column argues that three are amateurish efforts full of economic and factual errors. European economists should take such ignorance seriously. Failure to do so in the US allowed odious ideas to gain respectability. Spending cuts to improve confidence? No, the arithmetic goes the wrong way J. Bradford DeLong, 6 April 2012 The Vox debate on austerity rages on. Here Brad DeLong draws on his recent research with Larry Summers to argue that unless long-term real borrowing costs in the Eurozone exceed 5%, the short-term contractionary effects of spending cuts are likely to erode rather than bolster the overall fiscal situation. The austerity question: ‘How’ is as important as ‘how much’ Alberto Alesina, Francesco Giavazzi, 3 April 2012 Europe’s embrace of austerity has sparked a debate among economists. This column argues that the debate has gone astray. Until the critical principle – ‘how’ is as important as ‘how much’ – is embraced, the austerity debate in Europe will continue to be completely out of line with the real economic trade-offs. ECB inflation-fighting powers remain intact Christian Thimann, 30 March 2012 A recent Vox column argued that with the three-year liquidity operations, the ECB has “hit a limit in its ability to prevent an acceleration of inflation”. This column explains why the ECB’s inflation-fighting powers remain intact – and why the risks of a sudden inflationary spike remain low. Wanted: A real budget for growth – Commentary on UK Budget 2012 John Van Reenen, 29 March 2012 The UK’s recent budget reflects tensions felt throughout Europe – how to stem massive budget deficits while not choking off growth. The UK is often held up as a model for voluntary austerity, but this column argues that its policies are a poor model for growth. It asserts that there is a deep intellectual vacuum at the heart of the budget and the government’s approach to economic growth in general. Financial repression: Then and now Jacob Funk Kirkegaard, Carmen M Reinhart, 26 March 2012 Rich nations worldwide have a problem with debt. In the past, such problems have been dealt with by several tactics, including 'financial repression'. This column explains how the tactic works and documents its resurgence in the wake of the global and Eurozone crises. The logic and fairness of Greece’s programme Olivier Blanchard, 23 March 2012 The Greek package has cheered up markets. In this column, the IMF’s Chief Economist Olivier Blanchard argues that the programme deals squarely with the two most fundamental issues facing Greece – high debt and low competitiveness. And it is also fair, asking for sacrifices of both Greece and its creditors. A tale of two depressions redux Barry Eichengreen, Kevin H O’Rourke, 6 March 2012 The debate over stimulus versus austerity continues unabated. This column shows that, while industrial production and trade recovered much more quickly than during the Great Depression, both series now appear to be slowing down. It suggests that, as St Augustine would have said had he been managing director of the IMF, there is a case for additional fiscal consolidation and monetary normalisation, but not yet. In the slipstream of the Greek debt exchange Mitu Gulati, Jeromin Zettelmeyer, 5 March 2012 One of the most interesting questions arising from the ongoing Greek debt restructuring is what it implies about the feasibility of voluntary debt restructurings. Indeed, why would anyone voluntarily take a debt-exchange offer that promises a large reduction in repayments? This column argues creditors might feel safer with new debt instruments issued under English law than with old Greek-law regulated ones. Right-wing political extremism in the Great Depression Alan de Bromhead, Barry Eichengreen, Kevin H O’Rourke, 27 February 2012 The enduring global crisis is giving rise to fears that economic hard times will feed political extremism, as it did in the 1930s. This column suggests that the danger of political polarisation and extremism is greatest in countries with relatively recent histories of democracy, with existing right-wing extremist parties, and with electoral systems that create low hurdles to parliamentary representation of new parties. But above all, it is greatest where depressed economic conditions are allowed to persist. Are economics graduates fit for purpose? Diane Coyle, 22 February 2012 The global crisis has plunged the economic profession into a state of anxiety, at least in some quarters. One question, among many, is whether the way economics is taught at universities needs to be rethought. This column summarises the range of views raised at a recent conference on this issue organised by the British government, the Bank of England, and the Royal Economic Society. The ECB’s trillion euro bet Charles Wyplosz, 13 February 2012 Spreads on public debts in the Eurozone – with the exception of Greece – are falling hard and fast. This column argues that this is in large part because the ECB is now effectively guaranteeing Eurozone government debts. But it cautions that in doing so, the central bank is taking enormous risks. The fiscal compact treaty: Keynes and the German taxpayer Jacob Funk Kirkegaard, 6 February 2012 Europe’s new fiscal compact is seen by some as the death of Keynesian government spending. This column argues that such analysis is simply wrong. It says that there is still room for government spending in extreme situations, but that there are now more safeguards to maintain stability, reduce contagion, and placate German taxpayers. The coming resolution of the Eurozone crisis Fred Bergsten, Jacob Funk Kirkegaard, 26 January 2012 Policy reactions to the Eurozone crisis are seen by many as short-sighted, incoherent, and driven by political expediency. This column disagrees. What we are seeing is a game of chicken among the key political and economic powers in Europe. As the crash looms ever closer, the right deals will be struck and Europe will emerge stronger and with its currency intact.

VoxEU Debates Has austerity gone too far? Moderated by Giancarlo Corsetti Lead Commentaries include Fiscal consolidation: Too much of a good thing? John Van Reenen Fiscal austerity and policy credibility Marco Buti, Lucio R Pench The austerity debate: Make haste slowly Carlo Cottarelli Too early to sound the alarm Manfred J M Neumann Spending cuts to improve confidence? No, the arithmetic goes the wrong way J. Bradford DeLong Join the Debate CEPR Policy Research Policy Insights and Reports The UK in a Global World David Greenaway This joint BIS-CEPR-ESRC eBook looks at the UK’s medium-term growth prospects and the role that policy might have in shaping the economy’s growth trajectory once it emerges from recession. The Crisis Aftermath: New Regulatory Paradigms The Editors This new CEPR eReport is devoted to exploring the general issue of the origins of excessive risk-taking in the banking industry. In doing so, it provides the analytical ammunition required to rigorously examine regulatory policy at a time when it is undergoing a complete metamorphosis. From vicious to virtuous: A five-point plan for Eurozone restoration Marco Buti, Pier Carlo Padoan In late 2011, the financial crisis had evolved dangerously into a vicious circle of sluggish growth, tensions in sovereign debt markets, and banking sector fragility. CEPR Policy Insight No. 61 looks at what measures are required to turn the economy around. Trade, Competition, and the Pricing of Commodities Simon J Evenett, Frédéric Jenny After several decades of quiescence, global commodity prices almost doubled in 2008 and, after a brief fall, rose again in 2011. The papers in this new CEPR eReport aim to identify and assess the importance of the factors responsible for the recent increases in the levels and volatility of commodity prices. Deep integration and production networks Gianluca Orefice, Nadia Rocha Do deep preferential trade agreements enhance the development of cross-border production networks? CEPR Policy Insight No. 60 examines new evidence on this relationship and finds that the link runs both ways: deep integration often leads to production-sharing, and the formation of production networks often lays bare the ‘gaps’ in governance and institutions that deep integration can address. Trade Tensions Mount: The 10th GTA Report Simon J Evenett The 10th GTA report documents several factors that together imply that the protectionist threat to the world trading system is probably as significant as it was in the first half of 2009, when such concerns were last at their peak. Unfinished Business? The WTO's Doha Agenda Will Martin, Aaditya Mattoo The Doha Development Agenda (DDA) is in limbo and negotiators face a difficult “trilemma”: to implement all or part of the draft agreements as they stand today; to modify them substantially; or to dump Doha and start afresh. At this critical juncture, this CEPR/World Bank volume aims to provide a better empirical basis for informed choices. The Future of Banking Thorsten Beck This new Vox eBook presents a collection of essays by leading European and US economists that offer solutions to the crisis and proposals for medium- to long-term reforms to the regulatory framework in which financial institutions operate. A framework for two macro policy instruments: Money and banking combined Hans Gersbach The way in which monetary policy, macroprudential policy, and microprudential regulation of banks should be organised and conducted is a major, as yet unresolved, issue. In CEPR Policy Insight No.58, the author outlines a policy framework for addressing this issue. Resolving the Eurozone crisis: Time for conditional eurobonds John Muellbauer While prominent observers are preparing the funeral rites for the Eurozone, the author of CEPR Policy Insight No. 59 argues that the faulty machinery of the Eurozone can be successfully retrofitted and that it can survive. Discussion Papers Anti-Social Behavior in Profit and Nonprofit Organizations Emmanuelle Auriol, Stefanie Brilon While nonprofit organizations take advantage of the motivation of 'good' workers, they are more vulnerable than profit-oriented organisations to anti-social behavior: 'bad' workers only join them to behave badly. This paper looks at how mission-oriented organisations can deter destructive workers while maintaining the intrinsic motivation of committed employees. How can Bill and Melinda Gates increase other people's donations to fund public goods? Dean Karlan, John List With governments strapped for cash, charities are stepping up to provide public goods. But how can charities mobilise support from small donors to fund their work? CEPR DP8922 investigates whether altruists would donate more if they knew more about a charity’s quality. In the authors’ experiment, Bill and Melinda Gates matched donations to a particular charity. Small donors saw this as a signal of the charity’s quality – and donations soared. The role of speculation in oil markets: What have we learned so far? Bassam Fattouh, Lutz Kilian, Lavan Mahadeva What caused the price of oil to surge in 2003–08? CEPR DP8916 assesses – and finds little evidence for – the popular view that ‘speculation’ drives oil price shocks. Economic fundamentals, the authors argue, are still the main determinants. The dynamics of homeownership among the 50+ in Europe Viola Angelini, Agar Brugiavini, Guglielmo Weber In January the UK government launched an initiative to help the elderly downsize into smaller homes – and provoked the ire of pensioner groups nationwide. This reluctance to downsize to among the elderly perplexes economists, who maintain that leveraging housing wealth can help pensioners maintain a good standard of living on a fixed income. CEPR DP8889 investigates what is behind European pensioners’ puzzling housing decisions. Aid and agency in Africa: Explaining food disbursements across Ethiopian households, 1994–2004 Nzinga Broussard, Stefan Dercon, Rohini Somanathan Food aid can prevent starvation – but only if the neediest actually receive it. CEPR DP8861 examines how food aid in Ethiopian villages can be biased away from those who need it most. Households with greater local influence or groups targeted by international agencies often receive more than they need. Knowing more about these biases, the authors conclude, can improve distribution and save lives. Unhappiness and job finding Anne Gielen, Jan van Ours Much research has documented that unemployment makes people unhappy. But does unhappiness spur the unemployed to look harder for jobs? And if so, why do governments need to help them find work with active labour market policies? CEPR DP8842 finds that the unhappiest of the unemployed do search harder for jobs, but don’t find them faster – suggesting that even the most motivated jobseekers could benefit from activation policies. Gender differences in risk aversion: Do single-sex environments affect their development? Alison Booth, Lina Cardona Sosa Some blame women’s under-representation in high-level jobs on differences between the sexes in risk aversion and competitiveness. But are these differences in behaviour hardwired or learned? The authors of CEPR DP8690 tackled this thorny question with a controlled experiment in single-sex and co-educational classrooms. Women, they find, become far less timorous about uncertainty with the men out of the room. The long-run effect of 9/11: Terrorism, backlash, and the assimilation of Muslim immigrants in the West Eric D Gould, Esteban F Klor How does radical Islamic terrorism impact Muslim immigrants in the West? The backlash against Muslims in the US after the terrorist attacks of 9/11 damaged assimilation among Muslim immigrants, argue the authors of CEPR DP8797 – and they present strong evidence to prove it. Looking beyond the incumbent: The effects of exposing corruption on electoral outcomes Alberto Chong, Ana De La O, Dean Karlan, Léonard Wantchékon For democratic theorists, the notion that greater transparency improves accountability is axiomatic: when voters find out about political corruption, they punish the offending politicians by not voting for them again. But, the authors of CEPR DP8790 argue, many voters also respond to evidence of corruption by not voting at all – indicating that more transparency might not automatically result in a healthier democratic process. The role of central banks in financial stability: How has it changed? Willem Buiter The global crisis inaugurated a new era for central banks in the advanced economies, when their conventional role as interest rate-setters and lenders and market makers of last resort expanded. Central banks have become the custodians of stability for financial markets – a role for which they lack both democratic accountability and political legitimacy, argues Willem Buiter in DP8780. He decries the new “perverse division of labour” between central banks and fiscal authorities and appeals for a reassessment of this pathological arrangement.