vox

What’s wrong with Europe?

Isabella Rota Baldini, Paolo Manasse, 4 November 2013

Unlike the US, Europe is struggling to recover from the crisis. This is especially the case in certain European countries. This column discusses why the process of convergence in the Eurozone has slowed down. It proposes a way for European institutions to cope with the structural problems – with individual country-level reforms and a federal budget. Otherwise, the alternative could be a disintegration of the Eurozone.

Peer effects: Friendships and adolescent outcomes

Jason Fletcher, Stephen L. Ross, 3 November 2013

There is a large and growing literature on peer effects, but much less is known about the role of friendships and social relationships in student outcomes. The best evidence on the mechanisms behind aggregate peer effects suggests an important role for discipline and disruption. Very recent research suggests that friends can also have a substantial effect on student outcomes, and in many cases the effect of friends appears to be independent of aggregate peer effects.

Reduced uncertainty and Japan

Masayuki Morikawa, 2 November 2013

Reduced policy uncertainty can contribute to a country’s economic growth. This column highlights the negative influence of policy uncertainty and political instability on the growth of Japan. A survey shows that international trade and tax polices pose the greatest uncertainty on Japanese companies. The column concludes with a discussion of the mechanism via which uncertainty affects corporate behavior.

The effect of regulation on banks’ liquidity buffers

Clemens Bonner, Iman van Lelyveld, Robert Zymek, 1 November 2013

What are the determinants of banks’ liquidity holdings and how are these reshaped by liquidity regulation? Based on a sample of 7,000 banks in 30 OECD countries, this column argues that banks’ liquidity buffers are determined by a combination of both bank- and country-specific variables. The presence of liquidity regulation substitutes for most of these determinants while complementing the role of size and institutions’ disclosure requirements. The complementary nature of disclosure and liquidity requirements provides a strong rationale for considering them jointly in the design of regulation.

Do multinationals that expand abroad invest less at home?

Theodore H. Moran, Lindsay Oldenski, 31 October 2013

Criticism of 'offshoring' by US multinationals is widespread among politicians. The underlying assumption is that multinational corporations substitute domestic economic activity for foreign. This column presents evidence that foreign and domestic investment go hand-in-hand at the firm level. This suggests that policies penalising firms for investing abroad will hurt, rather than help, the US economy.