Recent Popular Editors' choice   What does ‘Keynesian’ really mean? Jonathan Portes, 7 February 2012 What does it mean to be a ‘Keynesian’? This column argues that, like so much in economics, the label has become politicised. The cost is an impoverished policy debate that is resulting in millions of avoidable job cuts. Falling policy uncertainty is igniting the US recovery Scott Baker, Nicholas Bloom, 7 February 2012 Reading the business press, one gets the impression that the world of policy is in a very uncertain state around the world. This column presents an up-to-date index of policy uncertainty and suggests that the calming of policy uncertainty may have aided recent economic prospects in the US. Unfortunately, policy uncertainty still appears extremely high in Europe with the Eurozone crisis. 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. Shifting motives: Explaining the build-up in official reserves in emerging markets since the 1980s Atish R Ghosh, Jonathan D Ostry, Charalambos Tsangarides, 6 February 2012 Over the past three decades, emerging market economies have been rapidly accumulating reserves – a trend that has resumed, and even accelerated, following the 2008 global financial crisis. This column examines factors driving this accumulation and how these factors have evolved over time and differed across countries. Seven things I learned about the transition from communism Andrei Shleifer, 5 February 2012 Twenty years ago, communist countries began their shift towards capitalism. What do we know now that we didn’t know then? Harvard's Andrei Shleifer, the Russian-born, American-trained economist, provides his answers and their relevance for contemporary policymakers. Is Italy going to make it? Nicola Borri, Gianfranco di Vaio, Giuseppe Ragusa, 4 February 2012 Will Italy be able cut its debt and abide by the new EU fiscal rules? This column presents a simulation of the evolution of the Italian debt-to-GDP ratio. It finds that Italy’s borrowing and saving plans are sustainable – even at today’s high interest rates. Europe without euro and EU Bruno S Frey, 3 February 2012 What will happen if the euro collapses? For many people, the answer is unmitigated disaster. But this column argues that to identify the euro, the EU, and Europe as one, as many politicians like to do, is totally misleading. A possible demise of the euro and the EU can be seen as a chance for the evolution of a better future Europe. Sovereign ratings when default can come explicitly or via inflation Charles A.E. Goodhart, 2 February 2012 Inflation in the UK is now more than double that of France, but only one country has had its credit rating downgraded. This column argues that government credit ratings should be aided by a second rating measuring the potential loss of real value, whether by inflation or default. Next-generation system-wide liquidity stress testing Christian Schmieder, Heiko Hesse, Benjamin Neudorfer, Claus Puhr, Stefan W Schmitz, 1 February 2012 The global financial crisis has shown that neglecting liquidity risk comes at a substantial price. This column presents a new framework to run system-wide, balance sheet data–based liquidity stress tests. The liquidity framework includes a module to simulate the impact of bank-run type scenarios, a module to assess risks arising from maturity transformation and rollover risks, and a framework to link liquidity and solvency risks. Understanding past and future financial crises Pierre-Olivier Gourinchas, Maurice Obstfeld, 1 February 2012 What explains the different effects of the crisis around the world? This column compares the 2007–09 crisis to earlier episodes of banking, currency, and sovereign debt distress and identifies domestic-credit booms and real currency appreciation as the most significant predictors of future crises, in both advanced and emerging economies. It argues these results could help policymakers determine the need for corrective action before crises hit. Foreign banks and the global financial crisis: Investment and lending behaviour Stijn Claessens, Neeltje van Horen, 31 January 2012 How did foreign banks adjust their investment and lending decisions during the global financial crisis? This column uses a new and comprehensive database to show that the crisis dramatically halted foreign direct investment in banking and that foreign banks often cut back on lending more than their domestic competitors. While exits have so far been limited, this is likely to change in the coming years. Anorexia and bulimia: New evidence from European women Joan Costa-i-Font, Mireia Jofre-Bonet, 30 January 2012 Striving for the perfect body can take its toll, both physically and mentally. This column shows how excessive preoccupation with self-appearance can give rise to preventable eating disorders, such as anorexia and bulimia, among European females. It is time for policy action to shift people’s perceptions of their ideal body closer to what is healthiest. Does the renminbi matter? Evidence from China’s disaggregated processed exports Willem Thorbecke, 29 January 2012 Understanding China’s economy is becoming as difficult as it is important. This is particularly the case for China’s exports and its exchange rate, which have been the source of controversy and intense debate in recent years. Shedding light on the issue, this column disaggregates China’s processing trade, with some surprising implications for policy in the region and elsewhere. Foreign banks: New data on trends and effects Stijn Claessens, Neeltje van Horen, 28 January 2012 Foreign banks on domestic soil have always been controversial. This column presents a newly collected, comprehensive database on bank ownership for 137 countries over the period 1995–2009. It shows that current market shares of foreign banks average 20% in OECD countries and 50% elsewhere. In developing countries, however, foreign bank presence is correlated with less private credit. Rogue aid: Should we fear China’s aid programme? Axel Dreher, Andreas Fuchs, 27 January 2012 China is often accused of providing ‘rogue aid’. China is said to be more interested in securing natural resources, export markets, and political alliances than concerned about the development of needy countries This column looks at the data on China’s aid allocations between 1996 and 2005. It finds that China is in fact no more self-serving than most Western donors. Constraints to growth in Sri Lanka and private enterprise development in low-income countries Christopher Woodruff, 27 January 2012 Christopher Woodruff talk to Viv Davies about his recent research in Sri Lanka that looks at the constraints to growth of micro-enterprises and how to generate job creation; he highlights the effects of wage subsidies, savings programmes, entrepreneurship training, firm registration and the transition from small informal firms to more dynamic enterprises. They also discuss a new 5-year competitive research grants programme, directed by Woodruff and co-ordinated by CEPR, that focuses on private enterprise development in low-income countries. 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. Surges in capital flows to emerging markets: Causes and policy implications Atish R Ghosh, Mahvash Saeed Qureshi, 26 January 2012 In the immediate aftermath of the global financial crisis, there was a rapid surge in net capital flows to emerging market economies. The subsequent decline in recent months has been even more rapid. Looking at data on 56 emerging market economies between 1980 and 2009, this column examines the causes of the mercurial movement of capital flows across countries and outlines the implications for policy. Europe’s fiscal union: Lessons from US federalism C Randall Henning, Martin Kessler, 25 January 2012 In the last few months, several Vox columns have drawn parallels between Europe today and an emerging – and even less stable – United States in the eighteenth century. This column stresses that Europe’s leaders in search of a fiscal union need not seek to replicate the US experience but they should at least learn from it. The back of Berlusconi: Is this the end of populism in Europe? Luigi Guiso, Helios Herrera, Massimo Morelli, 25 January 2012 What good might come from Europe’s crisis? Profligate governments in Italy and Greece, while pandering to the masses, have left their countries with crippling debt. This column draws parallels with Latin America and argues that the current hardship may sound a death knell for populism in southern Europe, as it has elsewhere.   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 694153 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 181062 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 130642 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 95351 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 93507 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 91665 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 84983 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 84414 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 83191 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 82684 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 79137 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 77956 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 73752 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 73355 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 73199 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 72026 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 69775 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 68591 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 68243 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 67906   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. Mispricing of sovereign risk and multiple equilibria in the Eurozone Paul De Grauwe, Yuemei Ji, 23 January 2012 Economists now agree that markets were wrong in placing the same risk premium on Greek bonds as on German bonds. But this column adds that today the same markets are also wrong in overestimating the risk that the periphery countries will default. Policymakers looking to calm such skittish markets should take note. Stop coddling Europe’s banks Morris Goldstein, 11 January 2012 Throughout the European debt soap opera, Europe’s leaders have expressed their willingness to “do whatever it takes” to restore stability and save the euro. This column argues that, too often, policymakers have in fact been “doing whatever it takes” to serve the banks. Happy 2012? Charles Wyplosz, 3 January 2012 Another year, and the Eurozone crisis lingers on. This column asks why, and discusses what can be done. It proposes a solution that can be achieved without the pain of a new EU treaty. Blanchard on 2011’s four hard truths Olivier Blanchard, 23 December 2011 2011 was supposed to be the year that saw the back of the Global Crisis. Alas, the crisis is still with us as the North Atlantic banking part of the crisis morphed into the Eurozone crisis, and slow growth in advanced countries once again threatens emerging economies. In this column, IMF chief economist Oliver Blanchard draws the lessons from 2011’s economic and policy developments. The political endgame for the euro crisis Charles A.E. Goodhart, Dirk Schoenmaker, 14 December 2011 The euro crisis continues to deepen, as European leaders continue with their ‘too little too late’ policy reforms. This column argues that fixing the Eurozone problems requires a strong direction of fiscal and banking policy, but that this in turn requires deeper political integration including an elected president of the European Commission and a two-chamber parliament representing EU citizens and EU member states. Taxing the 1%: Why the top tax rate could be over 80% Thomas Piketty, Emmanuel Saez, Stefanie Stantcheva, 8 December 2011 The top 1% of US earners now command a far higher share of the country's income than they did 40 years ago. This column looks at 18 OECD countries and disputes the claim that low taxes on the rich raise productivity and economic growth. It says the optimal top tax rate could be over 80% and no one but the mega rich would lose out. Do Eurozone leaders finally ‘get it’? Almost Charles Wyplosz, 5 December 2011 This week’s announcements by German Chancellor Angela Merkel and ECB President Mario Draghi that the Eurozone is taking steps towards a closer fiscal union seem to be calming markets and restoring confidence in the decision-making of Eurozone leaders. This column argues, however, that the devil is still in the detail. The ECB as a fully political player Jacob Funk Kirkegaard, 30 November 2011 The ECB seems to be in the background during this crisis – almost helpless due to Treaty obligations and dogmatic adherence to old monetary theories. This column argues that quite the opposite is true. The ECB is a full-blooded political actor engaging in a strategy aimed at forcing EU political leaders to embrace fiscal rectitude and a quantum leap forward in European integration. Why the ECB refuses to be a lender of last resort Paul De Grauwe, 28 November 2011 The euro has a matter of weeks to save itself, with several institutions now preparing for its collapse. Given this, why does the ECB still refuse to bail out Europe’s heavily indebted countries? This column provides an explanation. It says that the ECB may well be behaving rationally but adds that such behaviour is also foolish – and dangerous. Europe: After the crisis Charles A.E. Goodhart, 25 November 2011 The Eurozone could come to tatters temporarily. But the European ideal is so powerful that crisis and division will not permanently prevail. European leaders absorbed previous crises and bounced back to drive the European project forward. The same may happen again. This column discusses how the political and economic underpinning of the Eurozone must change to avoid future crises. Brinkmanship, reform pressure, and the endgame Marco Annunziata, 25 November 2011 Germany’s central bank had to buy its government’s bond this week after a failed bond auction. This shows that i) the economic devastation from a meltdown would engulf every EZ member and ii) avoiding a meltdown will require central bank action. This column argues that German politicians and the ECB are engaging in brinkmanship to force reforms. Eventually, however, they will relent and embrace a solution involving ECB bond purchases, Eurobonds, Eurozone rule changes, and stronger reforms at the national level. How much capital do European banks need? Viral Acharya, Dirk Schoenmaker, Sascha Steffen, 22 November 2011 The lack of market confidence in European banks is fed by the uncertainty about Eurozone sovereign debt. This column argues governments and banking supervisors should agree a recapitalisation package well before Christmas. It adds that the required amount to be raised by each bank should be presented as a euro amount and not as a ratio so as not to tempt banks to cut down assets instead of raising capital. Welcome to Eurotaly: If Italy falls, so does Europe Paolo Manasse, Giulio Trigilia, 21 November 2011 Ever since the collapse of Lehman Brothers, contagion has become the stuff of policymakers' nightmares. In recent weeks, with the very real prospect of default by European countries, the sleepless nights are returning. This column provides evidence that markets are bundling all European countries together. They believe that if Italy defaults, it would mean the end of the euro and no country would be left unscathed. An open letter to Dr Jens Weidmann Charles Wyplosz, 18 November 2011 The EZ crisis is approaching a tipping point beyond which market panic and slow government reaction threaten to create a generation-defining loss of jobs, savings, and pensions. This open letter to the president of the German central bank presents arguments that counter German objections to using the Eurozone’s last remaining defence against economic calamity – the ECB. Eurozone crisis: Credibility is not everything Paolo Manasse, 9 November 2011 UPDATED: Changes in the Italian government are driven by the country’s dire debt situation. This column, which updates a 31 October column that illustrated the unsustainability of Italian debt, argues that Berlusconi’s departure is necessary but far from sufficient. Drastic, but evenly distributed measures of consolidation and reform are necessary. What is holding Italy back? Daniel Gros, 9 November 2011 As Italy’s debt crisis enters the danger zone the question arises: Can Italy ever overcome its decade-old growth slump? This column shows that Italy’s growth fundamentals are all in pretty good shape, except one - good governance. Worldwide Governance Indicators show a dramatic worsening during the Berlusconi governments especially when it comes to the rule of law, government effectiveness, and control of corruption. Progress on improving these might in the end be more important for growth than the reforms the EU demands. Chipping away at public debt Anna Ivanova, Edouard Martin, Paolo Mauro, 9 November 2011 Fiscal consolidation is just one of the many ugly phases that we will have to get used to in the coming years. Yet how can governments reduce their debts without making things even uglier? This column argues that although today’s debts are the highest since World War II, there is much to be learned from previous attempts. The Greek revolt: Good news for Europe Charles Wyplosz, 4 November 2011 Greek Prime Minister Papandreou made a stand this week. Even though he was backed down, this column argues that he did the EZ a favour by providing an opportunity to change course. One way or another, a disorderly Greek default is in the cards with its attendant contagion. At that point a real solution is inevitable – one that requires EZ leaders and the ECB to play on the same side with credible rules for all.

VoxEU Debates Why do we need a financial sector? Lead Commentaries include What is the value added of banks? Christina Wang Where is Wal-Mart when we need it? Thomas Philippon What is the contribution of the financial sector? Andrew G Haldane, Vasileios Madouros The myth of financial innovation and the Great Moderation Wouter den Haan, Vincent Sterk On the tradeoff between growth and stability Alexander Popov, Frank Smets Join the Debate CEPR Policy Research Policy Insights and Reports 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. Reforming the International Monetary System Emmanuel Farhi, Pierre-Olivier Gourinchas, Hélène Rey This CEPR report presents concrete proposals aimed at improving the international provision of liquidity in order to limit the effects of individual and systemic crises and decrease their frequency. Public Debts: Nuts, Bolts and Worries Barry Eichengreen, Robert Feldman, Jeffrey Liebman, Jürgen von Hagen, Charles Wyplosz The 13th CEPR/ICMB Geneva Report on the World Economy takes a long-term perspective on debt sustainability, arguing that fiscal stabilisation is easier the faster the economy is growing. The implications of intra-euro area imbalances in credit flows Willem Buiter, Juergen Michels, Ebrahim Rahbari The Eurozone money transfer system, TARGET2, has huge imbalances whose meaning is subject to much debate. This Policy Insight by Citigroup Chief Economist Willem Buiter and co-authors argues that the imbalances show some banks can’t fund themselves without public support. Resolve Falters As Global Prospects Worsen: The 9th GTA Report Simon J Evenett The 9th GTA report shows that the pick-up in protectionism since the Seoul G20 summit coincides with the deterioration in economic sentiment. Discussion Papers 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. A series of unfortunate events: Common sequencing patterns in financial crises Carmen M Reinhart Financial crises often unfold according to common patterns, but the post-2007 contraction is in fact different from other post-WWII crises in its unusual severity, says Carmen Reinhart in CEPR DP8742. But the patterns of past crises may still provide clues on the future of housing, labour, and international financial markets. This paper outlines what that future might look like. Women's empowerment and economic development Esther Duflo Economic development and the empowerment of women are intertwined: gender inequality declines as a country develops, even without measures specifically targeted at women. And some evidence indicates that policies aimed at improving gender equality can help development. But, CEPR DP8734 argues, development alone is not enough to achieve gender equality and empowerment of women is not enough to spark development. Deprived of such a magic bullet, policymakers may need to commit to gender equality for its own sake if it is to be achieved. Optimal taxation of top labor incomes: A tale of three elasticities Thomas Piketty, Emmanuel Saez, Stefanie Stantcheva As protesters occupy Wall Street and cities around the world decrying the disparity between the top 1% and the remaining 99%, CEPR DP8675 investigates the link between skyrocketing inequality and top tax rates in OECD countries. The authors find a strong correlation between tax cuts for the highest earners and increases in the income share of the top 1% since 1975. Laws and norms Roland Bénabou, Jean Tirole Why do many oppose the selling of human organs if, as economists argue, this would increase supply? Economists see material incentives as key to changing behaviour – and are puzzled if incentives don’t work as expected. For psychologists, social norms explain such behaviour; legal scholars say law can shape society’s norms. CEPR DP8663 tries to reconcile these disparate insights with a unifying theory that could explain puzzles such the aversion to organ-selling as well as why so many people resist economists’ advice. The "Austerity Myth": Gain without pain? Roberto Perotti With crisis plaguing the Eurozone and austerity the favoured prescription for diseased EZ economies, some are asking: Can big fiscal consolidations, especially those based on cuts, actually restart growth? CEPR DP8658 examines four episodes of past fiscal consolidations in European countries and evaluates the evidence. Supply-side policies at the zero lower bound Jesús Fernández-Villaverde, Pablo A Guerron-Quintana, Juan F Rubio-Ramirez The authors of CEPR DP8642 offer a reminder about the usefulness of supply-side policies when the constraints of fiscal consolidation and the zero lower bound limit the macroeconomic-policymaking toolbox. A wealth effect from supply-side reforms could boost aggregate demand and help pull an economy out of the doldrums. Unconditional convergence Dani Rodrik If rich and poor countries have access to the same technology, shouldn't their productivity levels eventually converge? This would imply that poor countries should grow more quickly until they catch up – but such a tendency has never been proven. CEPR DP8631 shows that this convergence in output does in fact occur – but within manufacturing sectors rather than in economies as a whole.