News & Commentary:

Articles/Commentary

China oil futures hit record levels
Thomas Hale (FT) Feb 1, 2021
Beijing eyes Rmb-denominated markets that seek to challenge dollar's dominance.

US shale oil: can a leaner industry ever lure back investors?
Derek Brower and Myles McCormick (FT) Feb 1, 2021
Producers are consolidating after a tough year but recent higher oil prices are already testing their discipline.

Biden and the Global Tax Fight
WSJ Feb 1, 2021
Europe wants to lure Yellen into a revenue raid on U.S. tech giants.

Behind the Bitcoin Bubble
Andy Kessler (WSJ) Feb 1, 2021
Manipulative actors have been known to take advantage of the madness of crowds.

Wealthy nations are gobbling up vaccines. This moral failure will come back to haunt us.
Karen Attiah (WP) Feb 1, 2021
If wealthy countries continue to leave poorer nations behind, we will have another reminder that global power has rarely translated into true global leadership.

Can India Spend Its Way to a V-Shaped Recovery?
Andy Mukherjee (Bloomberg View) Feb 1, 2021
The country's new budget is good news for equity markets but bond investors are in sticker shock.

This Decade's Growth Champions
Kaushik Basu (Project Syndicate) Feb 1, 2021
Which countries will be the big economic success stories of the next ten years? South Korea is a safe pick, while Vietnam and Mexico also are poised to prosper, whereas India's divisive politics put that country out of the running for the time being.

Biden Goes Big
Joseph E. Stiglitz (Project Syndicate) Feb 1, 2021
The US president's proposed $1.9 trillion recovery package will provide enormous stimulus to the economy. The economic growth that results will generate substantial tax revenues, not just for the federal government but also for the states and municipalities that are now starved of the funds they need to provide essential services.

The Empires Strike Back at Europe
Joschka Fischer (Project Syndicate) Feb 1, 2021
Among the many foreign-policy challenges on Europe's plate, few are as pressing as the escalating tensions in the eastern Mediterranean, where Turkey's neo-Ottoman pretensions are threatening European interests. Because Turkey has chosen its own path, the task now is to secure coexistence, rather than integration.

Can Cheap Countries Catch Up?
Ricardo Hausmann (Project Syndicate) Feb 1, 2021
Being cheap may narrow poorer countries' path to prosperity by making technology relatively more expensive. But if these economies could develop the capabilities to export knowledge-intensive business services, their firms could be globally competitive while providing their employees with a higher standard of living.

Central bank digital currencies risk becoming a gigantic flop
Peter Bofinger and Thomas Haas (VoxEU) Feb 1, 2021
Central bank digital currencies are increasingly being discussed, mainly in relation to monetary policy and financial stability, but with less focus on their fundamentals. This column provides a comprehensive taxonomy for categorising central bank digital currency design options, and evaluates these options based on their allocative efficiency and attractiveness for users. The analysis shows that digital cash substitutes cannot be justified from either perspective. Instead, there is huge potential for central bank digital currencies in a retail payment system organised by the central bank, but without a new, independent payment object.

Regulation chills minor (but not radical) technological innovations
Philippe Aghion, Antonin Bergeaud, and John Van Reenen (VoxEU) Feb 1, 2021
While there is suggestive evidence that regulations may have a stifling effect on innovation, there is as yet no rigorous economic framework to quantify the magnitude of such regulatory effects on innovation and the aggregate economy. This column proposes such a framework tests its implications on data from France. As the framework predicts, regulations do indeed hamper innovation, but the negative effects concern only incremental innovations and are absent for radical innovations. Overall, regulations are estimated to reduce aggregate innovations by 5%.

China Monetary Tightening? Not so Fast.
Brendan McKenna (WF Econ Group) Feb 1, 2021
For the past week or so, the People's Bank of China (PBoC) seems to have engaged in sporadic operations that effectively tighten monetary policy in China. Pulling liquidity out of China's financial system has pushed short-term borrowing rates higher, and supported the renminbi as well as other emerging Asian currencies. While it is unclear if the PBoC will continue to tighten policy as guidance from the Chinese central bank is limited, we believe further policy actions will be more tempered amid the Lunar New Year and recent COVID-related lockdown measures. However, further tightening of liquidity could result in a stronger Chinese currency than we currently forecast, while it could also result in large and long-term capital outflows from emerging market risk assets.

Can Government Spending Help to Escape Recessions?
Regis Barnichon, Davide Debortoli, and Christian Matthes (FRBSF Econ Letter) Feb 1, 2021
A key to designing fiscal policy is understanding how government purchases affect economic output overall. Research suggests that expanding government spending is not very effective at stimulating an economy in normal times. However, in deep downturns when monetary policy is constrained at the zero lower bound, public spending is more potent and can become an effective way to escape a recession.

Europe should pay attention to Germany's debt brake debate
Ben Hall (FT) Feb 2, 2021
EU leaders will be grateful to Merkel aide who sought to lift Berlin's fiscal taboo.

Japan's love of robots is paying off
Leo Lewis (FT) Feb 2, 2021
Smart, mobile machines, like those filling its nursing homes, bring economic benefits to an ageing society.

The Risks of Too Much 'Stimulus'
Phil Gramm and Mike Solon (WSJ) Feb 2, 2021
Disposable real per capita income rose 5.5% in 2020, the highest rate since 1984, due largely to transfer payments.

Covid Shows That Europe's Fiscal Rules Are Outdated
Elga Bartsch (Bloomberg View) Feb 2, 2021
Without a new fiscal regime, the bloc's economic wounds may take far longer to heal.

Debt Is No Reason to Fear Trillions in Green Spending
Noah Smith (Bloomberg View) Feb 2, 2021
The investment is modest compared with other major infrastructure projects in U.S. history, and these projects will give back more than they cost.

Give Workers a Fighting Chance
Daron Acemoglu (Project Syndicate) Feb 2, 2021
At a time when businesses are awash in technologies capable of replacing human labor, the US tax code is encouraging them to embrace excessive levels of automation – even to the point where it is no longer efficient to do so. Rarely before has the deck been stacked so fully against workers.

Multilateral Cooperation for Global Recovery
Emmanuel Macron, Angela Merkel, Macky Sall, António Guterres, Charles Michel, and Ursula von der Leyen (Project Syndicate) Feb 2, 2021
We should not be afraid of a post-pandemic world that will not be the same as the status quo ante. We should embrace it and use all appropriate fora and available opportunities to make it a better world by advancing the cause of international cooperation.

The COVID Tsunami and Emerging Markets
Andrés Velasco (Project Syndicate) Feb 2, 2021
No one is sure why poorer countries have suffered proportionally fewer infections and deaths during the pandemic: weaker health systems, worse nutrition, and larger numbers of people with pre-existing medical conditions suggested the opposite outcome. But the economic implications have been clear.

Containing China is not a feasible option
Martin Wolf (FT) Feb 3, 2021
Unlike with the Soviet Union, the US and its allies have to co-operate and compete with its rising power.

Can We Please Stop Talking About Stocks, Please?
Farhad Manjoo (NYT) Feb 3, 2021
The stock market isn't the economy, but that's hard to remember in a bubble.

The Short March Back to Inflation
Michael D. Bordo and Mickey D. Levy (WSJ) Feb 3, 2021
Like today, policy makers of the 1960s had bigger worries than prices. Then a spike crushed the economy.

'Global Britain' pivoting fast and hard to Asia
Richard Javad Heydarian (AT) Feb 3, 2021
Fresh from its fraught exit from the European Union, the United Kingdom is pursuing its strategic future in Asia. The dynamic economies of the region will be central to its post-Brexit "Global Britain" strategy in an increasingly uncertain international environment.

Turkey's Inflation Busting Central Banker Faces an Implacable Foe
Daniel Moss (Bloomberg View) Feb 3, 2021
Naci Agbal is reckoning with bigger forces than Erdogan's hatred of high interest rates. He's having to deal with a world in thrall to easy money.

The Financial Lessons of the Covid-19 Pandemic
William C Dudley (Bloomberg View) Feb 3, 2021
There's a lot of fixing to do outside the core banking system.

From Moonshots to Earthshots
Mariana Mazzucato (Project Syndicate) Feb 3, 2021
The pandemic has highlighted the cost of neglecting public investment, both in the welfare state and value creation. But the crisis has also created a huge opportunity to pursue industrial policies beyond traditional sectoral and technological silos, and to restore mission-driven governance in the public interest.

Overcoming the Climate Challenge to Human Development
Kanni Wignaraja (Project Syndicate) Feb 3, 2021
Many countries' development models rely heavily on resource use, which is not sustainable in the long term. In the future, we must encourage countries to pursue prosperity while minimizing their carbon footprint by applying the knowledge, science, and technology now at our disposal.

What's Different About the GameStop Bubble?
Jeffrey Frankel (Project Syndicate) Feb 3, 2021
By conspiring to drive up struggling companies' stock prices, GameStop investors believe they beat Wall Street at its own game. But there are no clear-cut heroes or villains in this story, just some investors who will be able to weather their losses better than others.

Will East Asia Win the Pandemic?
Lee Jong-Wha (Project Syndicate) Feb 3, 2021
Investors and analysts seem confident that East Asian countries will be able to keep COVID-19 in check, achieve robust economic recovery, and maintain stimulus measures, leading to ever-higher corporate profits and, in turn, stock prices. Perhaps they should take a cold shower.

Exporting like China: The Determinants of Trade Status
Russell Cooper, Guan Gong, Guanliang Hu, and Ping Yan (VoxChina) Feb 3, 2021
We study the export decision of Chinese manufacturing firms, both public and privately owned enterprises. In 2019, China's exports of goods accounted for 13% of goods exported in the world and around 20% of China's GDP. The importance of understanding the determinants of trade patterns in China goes beyond its national borders. Observed export decisions contradict the prediction of the standard trade model in which exporters are more productive than non-exporters. Instead there is significant overlap in the distributions of productivity, particularly for private enterprises. To confront these observations, the economic framework stresses the dynamic decision by both state controlled and private entities to export in the face of labor adjustment costs. The analysis argues that labor adjustment costs along with variations in demand are needed to understand employment and trade dynamics.

Disunited Kingdom? Brexit, trade and Scottish independence
Hanwei Huang, Thomas Sampson, and Patrick Schneider (VoxEU) Feb 3, 2021
The Scottish National Party is calling for a second referendum on independence from the UK. This column examines the likely effect of changes in trade costs resulting from independence and Brexit on the Scottish economy, finding that independence would be two to three times more costly for Scotland than Brexit. In addition, rejoining the European Union following independence would do little or nothing to mitigate these costs, reflecting the fact that Scotland's trade with the rest of the UK is around four times greater than its trade with the EU. The combination of Brexit and independence is estimated to reduce Scotland's income per capita by between 6.3% and 8.7%.

The negative effects of tariffs on downstream sectors
Chad Bown, Paola Conconi, Aksel Erbahar, and Lorenzo Trimarchi (VoxEU) Feb 3, 2021
In a world in which production processes are fragmented across countries, the effects of tariffs propagate along supply chains, with firms in downstream industries suffering from protection upstream. This column studies the effects of US antidumping duties applied against China – its most frequent target – over 1988-2016 on US firms in downstream sectors. It finds that tariffs have large negative effects on downstream industries, increasing production costs and decreasing employment, wages, sales, and investment.

Exchange rates, invoicing, and prices
Raphael Auer, Ariel Burstein, and Sarah Lein (VoxEU) Feb 3, 2021
In 2015, the Swiss National Bank discontinued the minimum exchange rate of the Swiss franc relative to the euro, prompting a large and sudden appreciation of the franc. This column describes how the episode affected border prices, retail prices, and consumer expenditure. It shows how cross-sectional variation in border price changes by currency of invoicing carried over to consumer prices and allocations. This episode can help inform estimates of the sensitivity of retail prices to border prices and the sensitivity of import expenditures to relative price movements.

An Italian rescue mission for Mario Draghi
FT View Feb 4, 2021
Former ECB president must clean up a mess left by squabbling politicians.

Investor-friendly economics on trial in Andean elections
Michael Stott (FT) Feb 4, 2021
Angry voters turn to populists as pandemic exposes failings of market-friendly model.

China's struggle to control stock bubble offers lessons in investor mania
Josh Noble (FT) Feb 4, 2021
GameStop trading frenzy has echoes of 2015 boom and bust in Chinese shares.

IMF calls on Arab leaders to take action or risk new 'lost decade'
Heba Saleh and Andrew England (FT) Feb 4, 2021
Governments must implement reform to accelerate recovery of pandemic-battered economies, says Fund.

We are entering the era of e-globalisation
John Thornhill (FT) Feb 4, 2021
UiPath shows how Silicon Valley is no longer the must-be place for software companies.

US Fed should be more like People's Bank of China
Wiliam Pesek (AT) Feb 4, 2021
The circular design of the People's Bank of China headquarters in Beijing is an apt metaphor for the logic surrounding central banking in 2021.

Cooperation Critical to Reducing Divergent Paths to Recovery in Middle East and Central Asia
Jihad Azour (IMF) Feb 4, 2021
Access to the COVID-19 vaccine will play a critical role in the recovery ahead.

Secular stagnation, climate action, and the natural rate of interest
Martin Raiser and Sebastian Eckardt (Brookings) Feb 4, 2021
Advances in climate science suggest the pace of climate change is more rapid and its impacts more severe than previously projected. Contributing to the rising urgency is a greenhouse gas (GHG) emissions trajectory that has so far shown few signs of abating, despite a succession of global climate agreements. There has also been a continuous fall in the natural interest rate. Real interest rates have fallen steadily across countries and asset classes in the last 30 years, despite a steady expansion of debt. Long-term real interest rates are now close to zero or even negative in most major economies. These two trends bolster the case for front-loading climate action both by increasing the social cost of carbon and by lowering the cost of capital associated with investment in decarbonization.

India Can't Afford to Go on a Debt Binge
Mihir Sharma (Bloomberg View) Feb 4, 2021
With a spendthrift new budget, Narendra Modi is undermining his greatest strength as an economic manager.

Rising Inflation Will Force the Fed's Hand
Richard Cookson (Bloomberg View) Feb 4, 2021
The Fed has created the biggest financial bubble in history, but rising prices will require a fundamental rethink of monetary policy.

Profits Come Before Growth in a Post-Pandemic Economy
Conor Sen (Bloomberg View) Feb 4, 2021
Companies traumatized by the recession might just raise prices instead of supply as demand recovers. That will slow recovery, but only temporarily.

Biden's Asian Triangle
Joseph S. Nye, Jr. (Project Syndicate) Feb 4, 2021
The Japan-US alliance remains popular in both countries, which need each other more than ever. Together, they can balance China's power and cooperate with China in areas like climate change, biodiversity, and pandemics, as well as on working toward a rules-based international economic order.

The Limits of the EU-China Investment Agreement
Daniel Gros (Project Syndicate) Feb 4, 2021
The new EU-China Comprehensive Agreement on Investment will eventually be judged by its implementation and the concrete steps China takes to fulfill its promises. If European firms do not perceive any improvement, and China makes no progress on labor standards, the pact might come to represent an empty gesture.

As COVID rages, bankruptcy cases fall
Simeon Djankov and Eva (Yiwen) Zhang (VoxEU) Feb 4, 2021
Bankruptcies have fallen sharply in OECD economies because of the array of COVID-related support available to businesses, as well as imposed moratoria on bankruptcy filings. This column argue that this situation won't last, and that governments should start planning for a surge by the end of 2021 – ideally by reforming their bankruptcy laws, as the UK has done, and lessening the burden on courts.

A historical perspective on China's success against poverty
Martin Ravallion (VoxEU) Feb 4, 2021
The extraordinary reduction in poverty that China underwent after 1980 is often attributed to the pro-market reforms of Deng Xiaoping. This column uses a counterfactual perspective – comparing China's development to neighbouring countries with similar cultures and strong historical ties – to propose an alternative explanation. When judged against the development of South Korea and Taiwan, the bulk of China's progress since the reforms began seems mostly a matter of making up for the failures of the preceding 30 years, when Maoist policies left an extra quarter of the Chinese population in poverty.

Silver surge could signal coming commodities boom
Merryn Somerset Webb (FT) Feb 5, 2021
Digital economy will still need metals and minerals.

The EU's vaccine response has not made the case for Brexit
Henry Mance (FT) Feb 5, 2021
Being outside the bloc is sure to help the UK do a few things better.

Wrong Stimulus, Wrong Time
WSJ Feb 5, 2021
Biden wants twice the spending of 2009, though the economy is far stronger now.

Did Africa turn a corner in 2020 or did it just dodge a bullet?
Indermit Gill and Kenan Karakülah (Brookings) Feb 5, 2021
Divergent development.

China Opens Its Doors to Foreign Junk
Adam Minter (Bloomberg View) Feb 5, 2021
A resumption in recycling imports may not sound like much. But foreign mining companies should be worried.

The End of Demand Isn't the End for Big Oil
David Fickling (Bloomberg View) Feb 5, 2021
Producers may be worried because 150 years of uninterrupted growth have drawn to a close. The iron ore market may offer a lesson.

The Perils of an Uneven Global Recovery
Kenneth Rogoff (Project Syndicate) Feb 5, 2021
Heightened global economic risks mean that many poorer countries could take years to return to their pre-pandemic growth trajectories. And if higher inflation leads the US Federal Reserve to raise rates somewhat sooner than it currently plans, emerging markets will be hit particularly hard.

Reimagining the Platform Economy
Mariana Mazzucato, Rainer Kattel, Tim O'Reilly, and Josh Entsminger (Project Syndicate) Feb 5, 2021
Today's digital economy has grown up around a business model of data and wealth extraction, confounding traditional antitrust paradigms and undermining the public and social value that otherwise could be derived from technological innovation. The state can redress these problems, but only if it reclaims its proper role.

The COVID-19 pandemic is an unprecedented shock to the global economy and its potential scarring effects are thus difficult to predict. This column presents estimates of the long-term impact of past crises, suggesting that past epidemics and other exogenous shocks did not cause scarring effects, while the negative impact of financial crises on the long-term level of potential growth tends to be persistent. However, unlike previous exogenous shocks, the COVID-19 pandemic could affect the supply side of the economy through several channels and thus lead to a permanently lower level of potential output.
Natalia Martín Fuentes and Isabella Moder (VoxEU) Feb 5, 2021
The COVID-19 pandemic is an unprecedented shock to the global economy and its potential scarring effects are thus difficult to predict. This column presents estimates of the long-term impact of past crises, suggesting that past epidemics and other exogenous shocks did not cause scarring effects, while the negative impact of financial crises on the long-term level of potential growth tends to be persistent. However, unlike previous exogenous shocks, the COVID-19 pandemic could affect the supply side of the economy through several channels and thus lead to a permanently lower level of potential output.

Money creation, bank profits, and central bank digital currency
Drik Niepelt (VoxEU) Feb 5, 2021
The role of central bank digital currency is increasingly being discussed, both in terms of its utility in monetary policy as well as the controversy of bank-level profit from money creation. This column presents a method for quantifying the funding cost reduction enjoyed by banks, highlighting that money creation substantially contributes to profits. This raises important questions for policymakers to address as they seek to optimise the deployment of digital currencies within financial institutions.

Hedge funds resume role as Wall Street's villains
Laurence Fletcher (FT) Feb 6, 2021
Industry reels from GameStop backlash but has plenty of experience in fending off attacks.

Why Joe Biden's proposed stimulus is too big
Economist Feb 6, 2021
America's economy needs targeted relief more than indiscriminate spending.

Mexico's dangerous addiction to fossil fuels
FT View Feb 7, 2021
López Obrador has an outdated, state-led vision for the energy market.

Oil's Recovery Is Too Fast for Its Own Good
Julian Lee (Bloomberg View) Feb 7, 2021
Crude prices are testing $60 a barrel with OPEC holding the line on output cuts. That doesn't bode well for tensions between Saudi Arabia and Russia.

GameStop, Robinhood and the Return of the Wind Trade
Niall Ferguson (Bloomberg View) Feb 7, 2021
The history of economic bubbles casts doubt on the idea that the Reddit rebellion was a victory of the little guy over "the suits."

A wealth tax is the economic buffer rich nations need
Tim Bond (FT) Feb 8, 2021
Levy would support the pandemic recovery in countries such as the US and UK.

The flipside of the AI jobs revolution
Siddharth Venkataramakrishnan (FT) Feb 8, 2021
Artificial intelligence threatens some roles but optimists believe we can rethink — and reskill for — new ones.

The Problem With Using Tax Credits to Fight Poverty
Matt Bruenig (NYT) Feb 8, 2021
Requiring work in exchange for benefits is an unfair system that doesn’t help the neediest. But that could change.

The great US debt debate is underway again
Urban C. Lehner (AT) Feb 8, 2021
With a Democrat in the White House, Republicans are worrying about the national debt, even though they didn't squawk when it swelled by US$7 trillion during the Trump years.

For the first time in a year, oil prices top $60 a barrel
Economist Feb 8, 2021
Why the prices of both oil and the metals that seek to replace it are rising.

Anatomy of a flop: Why Trump's US-China phase one trade deal fell short
Chad P. Bown (PIIE) Feb 8, 2021
The Biden administration plans to review the phase one trade agreement President Donald Trump forged with China in late 2019. Good. Much of the deal was a failure. Its centerpiece was China's pledge to buy $200 billion more of US goods and services split over 2020 and 2021.

Latin America and Caribbean's Winding Road to Recovery
Alejandro Werner, Anna Ivanova, and Takuji Komatsuzaki (IMF) Feb 8, 2021
Latin America and Caribbean economies managed to bounce back from COVID-19's initial economic devastation earlier in 2020. But the pandemic's resurgence towards the end of the year threatens to thwart an uneven recovery and add to the steep social and human costs.

Ultra-Long U.S. Treasuries Are an Ultra-Long Shot
James Clark (Bloomberg View) Feb 8, 2021
The Treasury Department's decision not to issue very long-term bonds reflects savvy, not incompetence.

If Biden Goes Big Now, He May Have to Go Small Later
Tyler Cowen (Bloomberg View) Feb 8, 2021
Yes, a lot of Covid spending is necessary, but the basic laws of economics still hold.

In Economics, Hawk and Dove Distinctions Are for the Birds
Daniel Moss (Bloomberg View) Feb 8, 2021
Reducing central bankers to caricatures risks missing the big picture. These days, policy makers have to be more nimble.

Building Back Broader
Raghuram G. Rajan (Project Syndicate) Feb 8, 2021
Developed countries are spending enormous amounts of money in an attempt to recover from the pandemic, and should not waste it on old and tired schemes that have rarely worked. Instead, national or state governments should fund innovative local projects with high levels of community involvement and engagement.

Whatever It Takes in Italy?
Paola Subacchi (Project Syndicate) Feb 8, 2021
With deft and bold action, Mario Draghi's unity government in Italy can go some way toward addressing the COVID-19 emergency, laying the groundwork for long-term economic recovery, and restoring Italians' confidence in their political leaders. But he cannot do it alone.

Poor Countries' Technology Dilemma
Dani Rodrik (Project Syndicate) Feb 8, 2021
Recent patterns of technological change in the rich world have made it more difficult for low-income countries to develop and converge with income levels in the developed world. These changes have contributed to deepening economic and technological dualism even within the more advanced segments of developing countries' economies.

Inflation and the Biden stimulus
Jean-Pierre Landau (VoxEU) Feb 8, 2021
The fiscal stimulus pushed by the new US administration – much larger that the remaining output gap – has recently triggered a new and fascinating debate on the risk of inflation. This column argues, however, that the focus on short-term imbalances may obscure the long-term risk of fiscal dominance. This points to the need for a new, revitalised approach to central bank independence which would aim less at solving the time-inconsistency problem (eliminating the incentive to cheat) and more on preserving central banks' unconstrained ability to act and avoid fiscal dominance in the future.

Fostering the diffusion of general purpose technologies
Markus Nagler, Monika Schnitzer, and Martin Watzinger (VoxEU) Feb 8, 2021
The secular decline in productivity growth is blamed by some on the slow diffusion of new general purpose technologies, so it is important to understand what slows down this diffusion and how it can be speeded up. This column presents evidence from the diffusion of the transistor, one of the most important general purpose technologies of our time. It shows that patents on general purpose technologies are likely to cause considerably more harm than patents on other technologies unless a standardised licensing regime is put in place. Not only do they block more follow-on innovation, but in particular they block valuable follow-on innovation arising from cross-technology spillovers.

Household Debt Squeezes Consumer Spending
Jay Bryson, Tim Quinlan, and Sara Cotsakis (WF Econ Group) Feb 8, 2021
In this fifth installment in our series of economic risks, we analyze whether the increase in household debt in recent years could exert headwinds on consumer spending going forward. Is a repeat of 2008 in the cards?

Climate Change Is a Source of Financial Risk
Glenn D. Rudebusch (FRBSF Econ Letter) Feb 8, 2021
The ongoing trend of climate change—including higher temperatures and more extreme weather—will result in economic and financial losses to many businesses, households, and governments. Moreover, the uncertainty about the severity and timing of these losses is a source of financial risk. Recently, the Federal Reserve joined other financial regulators to warn that such climate-related financial risk may threaten the safety and soundness of individual financial institutions and the stability of the overall financial system.

The dilemma facing foreign investors in Myanmar
FT View Feb 9, 2021
Cutting ties carries wider risk of pushing south-east Asian country into Chinese embrace.

Sweden flies the flag for the free-trade cause in the EU
Martin Sandbu (FT) Feb 9, 2021
Stockholm warns of dangers associated with Brussels' idea of 'strategic autonomy'.

Joe Biden's $1.9tn plan is necessary as economic recovery insurance
Gene Sperling (FT) Feb 9, 2021
History shows the risks of delivering too little stimulus far outweigh the costs of giving too much.

Why I was wrong to be optimistic about robots
Sarah O'Connor (FT) Feb 9, 2021
Humans are being crunched into a robot system working at a robot pace.

'We expect Italy to do its homework': Draghi and the EU recovery fund
Sam Fleming, Miles Johnson, and Daniel Dombey (FT) Feb 9, 2021
Brussels has a huge amount of money to spend on its member states. So how will it use its leverage?

The Clash of Liberal Wonks That Could Shape the Economy, Explained
Neil Irwin (NYT) Feb 9, 2021
They all agree pandemic aid is warranted, but the question is how big and how quickly.

Do Fed Policies Fuel Bubbles? Some See GameStop as a Red Flag
Jeanna Smialek and Matt Phillips (NYT) Feb 9, 2021
Analysts warn that low-interest rates are promoting speculative bubbles. The Fed itself has downplayed the possibility that it’s behind asset prices.

Junk Has Never Been So Valued
WSJ Feb 9, 2021
The average yield on low-rated bonds falls below 4% for the first time.

Xi walks a tightrope by reining in Jack Ma
William Pesek (AT) Feb 9, 2021
Jack Ma, as everyone knows, has had a serious falling-out with Chinese President Xi Jinping’s government. But global investors still can’t get enough of the billionaire founder of Alibaba Group Holdings.

Stock market cheers China’s anti-monopoly measures
David P. Goldman (AT) Feb 9, 2021
Upstart tech companies outperformed established mega-cap stocks in China’s stock market during the first five weeks of 2021, after Chinese regulators proposed a set of measures to prevent the tech giants from stifling up-and-coming competitors.

Is a dollar crash coming?
Marek Dabrowski (Bruegel/TIE) Feb 9, 2021
Even if a sovereign debt crisis is avoided, the public debt burden will negatively impact growth.

The IMF’s Gold: A Global Resource or a Chimera?
Mark Plant and David Andrews (CGD) Feb 9, 2021
Despite difficulties, gold sales have been used to support LICs and could be used again.

Enabling Substantial IMF Lending to Low-Income Countries for the Recovery
Mark Plant and David Andrews (CGD) Feb 9, 2021
As global leaders begin to put together an international financing package to help low-income countries (LICs) recover from the COVID-19 crisis, they are looking to the International Monetary Fund (IMF) to be a critical financial and policy anchor for LIC’s sustainable economic recovery.

India Has a Backdoor Entry Into Digital Currency. Will It Take It?
Andy Mukherjee (Bloomberg View) Feb 9, 2021
The RBI is putting the government bond market online with a program that could potentially lead to electronic accounts with the central bank to pay for things like your daily cup of coffee.

Adios, Mr. China. HKEX Takes a Turn Down Argentine Way
Matthew Brooker (Bloomberg View) Feb 9, 2021
Mainland-born Charles Li had a brilliant record running Hong Kong’s exchanges for 11 years. His replacement isn’t Chinese. It’s a shrewd choice

History Tells Us to Worry About Inflation
Ferdinando Giugliano (Bloomberg View) Feb 9, 2021
Macroeconomics always has its fads: The latest is embracing public debt and not worrying about inflation. But fashions change very quickly.

Cash Isn't Going to Solve All the Poor's Problems
Noah Smith (Bloomberg View) Feb 9, 2021
To ensure people's basic needs are met for the long term, we need to tailor programs to meet the particular challenges of housing, health care and nutrition.

New-Model Central Banks
Barry Eichengreen (Project Syndicate) Feb 9, 2021
Monetary authorities are increasingly expected to address issues such as climate change and inequality, over the objections of those who insist that central banks' narrow mandate is what sustains their operational independence. But ignoring these issues, or saying they're someone else's problem, is no longer an option.

An EU-China Deal for a Bygone Era
Wendy Cutler (Project Syndicate) Feb 9, 2021
After four years of Donald Trump’s “America First” agenda, the European Union could be forgiven for attempting to go it alone. But, if history is any guide, no single economy can compel China to change its most problematic behaviors.

Macroeconomic stabilisation, the lower bound, and inflation: Expectations matter
Ioana Duca-Radu, Geoff Kenny, and Andreas Reuter (VoxEU) Feb 9, 2021
When interest rates cannot go any lower, the economy can be stabilised if consumers expect the rate of inflation to increase. Yet, the evidence for this stabilising effect has been very mixed. This column presents new evidence from a monthly survey of over 25,000 individual consumers across the euro area, showing that consumers are indeed more ready to spend if they expect inflation to be higher in the future. While generalised in the population, the stabilising effect is stronger when nominal interest rates ¬are constrained at the lower bound.

Robots and employment: Evidence from Japan
Daisuke Adachi, Daiji Kawaguchi, and Yukiko Saito (VoxEU) Feb 9, 2021
Previous studies have reported that the adoption of robotic technologies in industry reduces both employment and wages. This column examines the experience of Japan, which is unique due to early industry penetration and the fact that almost all the robots were domestically produced. Applying a different method from those in previous studies, it shows that the penetration of industrial robots has positive impacts on both employment and wages. This implies the potential for harmonisation of human work with future labour-replacement technology, such as artificial intelligence.

Sri Lanka’s Foreign Debt Crisis Could Get Critical in 2021
Umesh Moramudali (Diplomat) Feb 9, 2021
Sri Lanka’s debt problem has deep roots. How bad things can get in 2021?

The Fed must be mindful of mounting inflation worries
FT View Feb 10, 2021
A strong recovery and sizeable stimulus raise the possibility of the US ‘overheating’.

We must vaccinate the world — now
Martin Wolf (FT) Feb 10, 2021
The cost of jabs for all would be a rounding error; it is also the only way to end the pandemic for good.

How herd behaviour drives action on r/WallStreetBets
Ian Goldin (FT) Feb 10, 2021
Oxford research shows influence of social contagion on stocks such as Tesla and GameStop.

Bitcoin is not a hedge against tail risk
Nouriel Roubini (FT) Feb 10, 2021
Elon Musk may be buying it, but that doesn’t mean everyone else should follow suit.

No winners in China-Australia trade war
Melissa Conley Tyler (AT) Feb 10, 2021
As Australian producers scramble to find markets for goods hit by Chinese import restrictions, it might look as though China is winning the diplomatic war.

Can the EU-China investment deal lead to global economic cooperation?
Anabel González (PIIE) Feb 10, 2021
No sooner had the European Union concluded a long-negotiated investment agreement with China late last year than criticism poured in. Some concerns are well-founded. Europe is taking a risk by moving ahead when the United States and Europe have yet to devise a unified approach to Beijing. For China it is clearly a smart move. But the deal, known as the Comprehensive Agreement on Investment (CAI), can pave the way to a more structured engagement and agreed upon rules between China and the rest of the world, especially if it leads to broader cooperation under the umbrella of the World Trade Organization (WTO).

Will COVID accelerate productivity growth?
Dalia Marin (Bruegel) Feb 10, 2021
The COVID-19 pandemic has prompted an increasing number of rich-country firms to reduce their reliance on global supply chains and invest more in robots at home. But it is probably too soon to tell whether this switch will increase productivity growth in advanced economies.

USAID’s policy voice should be heard
J. Brian Atwood and Larry Garber (Brookings) Feb 10, 2021
USAID’s policy voice can be vital, especially in a world where the source of many transnational threats is underdevelopment.

We Need an Operation Warp Speed for the World
Bloomberg View Feb 10, 2021
Developed countries must drive higher global production of Covid-19 vaccines.

Four More Reasons to Worry About U.S. Inflation
William C Dudley (Bloomberg View) Feb 10, 2021
This recovery will be very different than the last one.

Inflation Data Reduce Obstacles to Stimulus But Amplify Risks
Mohamed Aly El-Erian (Bloomberg View) Feb 10, 2021
The bigger disconnect between Main Street and Wall Street raises the possibility of financial instability and policy complications.

The Shadow of England in India’s Farm Protests
David Fickling and Andy Mukherjee (Bloomberg View) Feb 10, 2021
Faster urbanization and quicker economic growth await. But, first, New Delhi has to make agricultural reforms palatable to farmers.

Let’s Get Real About AI
Stan Matwin (Project Syndicate) Feb 10, 2021
While further progress in the development of artificial intelligence is inevitable, it will not necessarily be linear. Nonetheless, those hyping these technologies have seized on a number of compelling myths, starting with the notion that AI can solve any problem.

Restoring Nature to Economics
Diane Coyle (Project Syndicate) Feb 10, 2021
Human economic activity makes extensive use of the ecosystem services nature provides, but these barely feature in measurements of GDP. It is vital to restore nature to economic analysis and policy before the damage to the natural world – and thus to everybody’s standard of living – becomes irreparable.

Reflections on a Plague Year
Jim O'Neill (Project Syndicate) Feb 10, 2021
It may be too soon to draw firm conclusions about which pandemic-induced changes are likely to prove long-lasting. But some of the most significant could include enhanced vaccine development, increased government spending, accelerated digitalization, and the continued rise of China.

Special Deals from Special Investors: The Rise of State-Connected Private Owners in China
Chong-En Bai, Chang-Tai Hsieh, Michael Zheng Song, and Xin Wang (VoxChina) Feb 10, 2021
We document a hierarchy of private owners connected to the state through equity investment and a rapid expansion of this hierarchy over the past two decades. We build a model to show how the effects of a special deal from a state investor can be transmitted and amplified through the hierarchy. Our estimation suggests that the expansion in the span of state-connected private owners may have increased aggregate output of the private sector by 4.2% a year between 2000 and 2019.

Europe’s trade strategy for the age of geoeconomic globalisation
Christian Bluth (VoxEU) Feb 10, 2021
The nature of globalisation is changing, with the US and China making increasing use of geoeconomic instruments in their big power competition. A new CEPR/RESPECT book discusses how, in its new trade strategy, the EU will have to react to this development as well as coming up with responses to the challenges posed to its trade policy by climate and demographic change, technological developments, a weakening of multilateral institutions, and an increased politicisation of trade policy. The answer must lie in a value-driven trade policy, efforts to restore the rules-based trading order, risk management, and the development of defensive geoeconomic capabilities.

Memo to the new WTO Director-General: Never waste a crisis
Simon Evenett and Richard Baldwin (VoxEU) Feb 10, 2021
Following the appointment of its new Director-General, the World Trade Organization has the best opportunity in years to revive its fortunes. This column, written as an open letter to the incoming Director-General of the WTO, argues why and offers ideas on how.

How China’s 17+1 Became a Zombie Mechanism
Andreea Brînza (Diplomat) Feb 10, 2021
The Central and Eastern European countries were supposed to be China’s gateway to Europe; instead they have become its biggest headache

The ‘stonk’ bubble poses significant global risks
Carson Block (FT) Feb 11, 2021
The primary causes of this market dysfunction are the prevalence of passive investing and leverage.

A decade after Hosni Mubarak fell, Egypt is a diminished state
David Gardner (FT) Feb 11, 2021
Promise of the revolution has given way to stifled dissent, reduced foreign investment and a decline in regional influence.

South Africa’s problems only begin with its Covid variant
Justice Malala (FT) Feb 11, 2021
A stumbling economy and sense of drift in Cyril Ramaphosa’s once-promising government makes matters worse.

An ‘Economic Article 5’ to Counter China
Jonas Parello-Plesner (WSJ) Feb 11, 2021
An attack on wines from Australia is an attack on democracy.

The China model has come to America
Bruce Abramson (AT) Feb 11, 2021
China envy runs strong among America’s progressive elite. The Communist Party of China’s hold on power and centralized decision-making has long appealed to progressives infuriated with their inability to mandate solutions to global warming (and other progressive priorities).

The pandemic led consumers to spend more on goods, less on services
Jason Furman and Wilson Powell III (PIIE) Feb 11, 2021
The pandemic has forced countless businesses to close. As a partial result, consumers spent more on goods and less on services in 2020 than in the previous year. Over the four quarters of 2020, spending on durable goods, which includes motor vehicles and household furnishings, grew by almost 12 percent. Services, which account for around two-thirds of consumption, fell by 6.8 percent, causing total consumption to decrease.

How e-Government Services Can Pay Dividends
Ali Al-Sadiq (IMF) Feb 11, 2021
Recent IMF staff research has linked-for the first time-the accessibility of government information and services online to the volume of foreign direct investment a country receives. For many countries, this positive impact is likely to be stronger as the pandemic pushes governments to provide even more services and information online.

Can the EU Successfully Build a Hydrogen Economy?
Constantine Levoyannis (BRINK) Feb 11, 2021
The EU is leading the world in the development of hydrogen technology. The task of achieving climate neutrality in 2050 is now front and center in the EU's overall strategy — and hydrogen has emerged as a big piece in that puzzle.

Robots Won't Save Us From an Age of Inflation
John Authers (Bloomberg View) Feb 11, 2021
Longer lives mean more old-age nurses, a role that can’t easily be automated. That could change the balance between labor and capital.

Everyone Has to Pay When America Gets Too Old
Noah Smith (Bloomberg View) Feb 11, 2021
Population stability was never something the U.S. had to worry about, but now it needs a plan.

Generation Z May Avoid the Millennials’ Economic Curse
Mark Gongloff (Bloomberg View) Feb 11, 2021
The post-pandemic recovery could create opportunities the previous generation lacked.

Gas Won’t Save a Nation That Can’t Fill Up Its Tank
David Fickling (Bloomberg View) Feb 11, 2021
Australia’s manufacturing sector is overly dependent on a fuel source that’s petering out as refineries close.

Emerging Economies Have a New Imperative
Jonathan Woetzel and Mekala Krishnan (Project Syndicate) Feb 11, 2021
The COVID-19 pandemic has forced companies and governments around the world to reconsider long-held assumptions about economic-development strategies. Nowhere is this reckoning more urgent than in export-oriented emerging economies, which now must focus on supply-chain resilience on top of everything else.

Tackling the COVID Hunger Crisis
Gordon Brown and Mark Lowcock (Project Syndicate) Feb 11, 2021
The choice facing world leaders is simple: act now to tackle the hunger crisis, or pay a much higher price later. Immediate action will be cheaper and save more lives than responding only after multiple famines have taken hold and a generation’s missed education has exacted a terrible toll.

Europe’s ESG Opportunity
Olivia Grégoire and Bertrand Badre (Project Syndicate) Feb 11, 2021
Far from being a purely technical matter, assessing firms’ non-financial performance is a deeply political issue. Europe’s inclusive governance model may give it a competitive edge in shaping global environmental, social, and governance regulations for firms and investors.

The dangers of sustainability metrics
Alex Edmans (VoxEU) Feb 11, 2021
Policymakers, investors, and stakeholders are demanding that companies report sustainability metrics so that they can be held accountable for delivering social performance. Doing so increases the total amount of information in the market and reduces the cost of capital. However, real decisions depend on not the total amount of information, but the balance between ‘hard’ (quantitative) and ‘soft’ (qualitative) information. Since sustainability metrics only contain the former, they distort this balance – skewing managers’ sustainability investments to ones with short-term payoffs.

The geography of working from home and the implications for the service industry
Gianni De Fraja, Jesse Matheson, James Rockey, and Daniel Timms (VoxEU) Feb 11, 2021
The Covid-19 outbreak has led to an unprecedented rise in the number of jobs done from home. This column discusses the implications of this shift for locally consumed services such as restaurants, hairdressers, and gyms. Using precise data on the location of homes and offices of workers across the UK, it finds that there is large heterogeneity in the impact of working from home on these businesses. While city centres suffered a significant drop in demand for services, suburban neighbourhoods experienced an increase in demand. Policies aimed at helping the service industry should take this diverse impact into account.

The Long Road to Free Trade in Nigeria—and Beyond
Doyin Olagunju (FP) Feb 11, 2021
The African Continental Free Trade Area is already running up against the hard realities of the continent’s endemic trade barriers.

The Fed needs to call time on cheap money
Gillian Tett (FT) Feb 12, 2021
Jay Powell, of all people, is haunted by the ghost of past monetary policy mistakes.

The Pandemic Spending Hangover
WSJ Feb 12, 2021
Federal debt held by the public has reached 100% of GDP even before Biden’s plans become law.

Why Japan Inc can’t and won’t quit China
William Pesek (AT) Feb 12, 2021
As the fog of economic war lifts, the ways in which China outmaneuvered Donald Trump’s White House are becoming clearer. Nowhere more so than in Japan, a nation the former US president tried hard to pull out of China’s commercial orbit.

The City of London Fails to Take Back Control After Brexit
Lionel Laurent (Bloomberg View) Feb 12, 2021
The European Union is feeling emboldened in its tough stance on finance, much to the Brits’ displeasure.

Europe Doesn’t Need a $30 Billion White Elephant
Alex Webb (Bloomberg View) Feb 12, 2021
The continent desperately wants to become self-reliant when it comes to tech. But it’s focusing on the wrong things.

What if Artificial Intelligence Decided How to Allocate Stimulus Money?
Stephen L Carter (Bloomberg View) Feb 12, 2021
New Treasury Department software points the way. But research suggests that it’s impossible to show that an artificial “superintelligence” can be contained.

Schrödinger’s Bitcoin
Willem H. Buiter (Project Syndicate) Feb 12, 2021
Notwithstanding the recent spectacular surge in its price, Bitcoin will remain an asset without intrinsic value whose market value can be anything or nothing. Only those with healthy risk appetites and a robust capacity to absorb losses should consider investing in it.

Money markets, central bank balance sheets, and regulation
Stefano Corradin, Marie Hoerova, and Glenn Schepens (VoxEU) Feb 12, 2021
Euro area money markets have gone through substantial changes and turbulent periods over the past 15 years. These have included the global and euro area sovereign debt crises, new liquidity and leverage requirements, and the expansion of the Eurosystem balance sheet through asset purchase programmes. This column discusses the interaction between money markets, new Basel III regulations, and central bank policies. The analysis shows that money market conditions worsen when financial stress increases, or if central bank asset purchases induce scarcity effects. It outlines implications of changing money market conditions for monetary policy implementation and transmission.

Trade imbalances and the rise of protectionism
Samuel Delpeuch, Etienne Fize, and Philippe Martin (VoxEU) Feb 12, 2021
How much can trade imbalances account for the rise in protectionism of the past ten years? This column reveals that both bilateral and multilateral trade imbalances are strong predictors of protectionist attacks, partly – but not entirely – driven by the US and the Trump years. Moreover, countries with more expansionary fiscal policies react to the ensuing trade imbalance by a more protectionist trade policy. A transatlantic gap in the fiscal response to the COVID crisis may therefore pave the way to renewed trade tensions.

Biden Should Finish Trump’s One Good Trade Idea
Peter S. Rashish (FP) Feb 12, 2021
The president can corner China by bringing one of his predecessor’s foreign-policy initiatives to completion.

Part VII: Premature Fiscal Tightening in Major Economies
Jay Bryson and Nick Bennenbroek (WF Econ Group) Feb 12, 2021
In this seventh installment in our series on economic risks, we look at premature fiscal tightening in some of the world's major economies. Could the global economy be at risk of a renewed downturn in the next year or so due to excessive fiscal consolidation?

Why the world needs a Covid-19 exit strategy
FT View Feb 13, 2021
The public needs to know when, how and how quickly restrictions will be lifted.

Ngozi Okonjo-Iweala: Nigerian powerhouse to head the WTO
William Wallis (FT) Feb 13, 2021
Former World Bank vice-president wants trade body to focus on raising living standards in the wake of the pandemic.

Commodity rally raises hopes of new bull run
Michael Mackenzie (FT) Feb 13, 2021
Asset class benefits from investor demand for a hedge against increased inflation.

Foreign Aid Is Having a Reckoning
NYT Feb 13, 2021
The Black Lives Matter movement has given leaders from the Global South new traction for change.

How rising inflation could disrupt the world’s economic policies
Economist Feb 13, 2021
The debate is hotting up.

America Inc has survived the oddest year in modern times. What next?
Economist Feb 13, 2021
Stockmarkets are pricing in an economic snap-back and growth on top of it. That may be too rosy.

Most Important Number of the Week Was 1.4%
Robert Burgess (Bloomberg View) Feb 13, 2021
January inflation was tame, but a coming spike doesn’t indicate a runaway surge in prices.

The Road From Brexit to Becoming a Settled State
Therese Raphael (Bloomberg View) Feb 13, 2021
Former Brexit Secretary David Davis shares his views on what went wrong in the early negotiations, but why Britain’s EU split is right ultimately.

The moment of danger for Europe will be when the recovery starts
Martin Sandbu (FT) Feb 14, 2021
EU leaders can learn from US president Joe Biden and go for bold fiscal support measures.

Oil Price Targets Would Make a Far Better Goal
Julian Lee (Bloomberg View) Feb 14, 2021
There's no easy way to measure supply and demand, making OPEC's efforts to game out a recovery from the pandemic a crapshoot.

The Magic of a Full-Employment Economy
Matthew G Yglesias (Bloomberg View) Feb 14, 2021
By focusing on jobs, Biden and Powell can generate long-lasting societal benefits.

Inflation Fears Are Overblown
Daniel Moss (Bloomberg View) Feb 14, 2021
There’s a lot of talk about the quickening pace of price increases and the wreckage it can leave. I don't buy it.

The consensus is wrong on European stocks
Karen Ward (FT) Feb 15, 2021
Given current low expectations, there are opportunities for investors.

Emerging nations are better equipped to survive the pandemic’s economic shock
Ruchir Sharma (FT) Feb 15, 2021
When the sugar rush of stimulus fades, developed countries are likely to confront a harsh lesson.

Economic costs of inequitable vaccine distribution across the world
Cem Cakmakli, Selva Demiralp, Sebnem Kalemli-Ozcan, Sevcan Yesiltas, Muhammed A. Yildirim (VoxEU) Feb 15, 2021
Countries around the world are beginning to vaccinate their populations against Covid-19. This column calculates the global economic costs from the absence of an equitable distribution of vaccines, with a focus on international trade and production linkages. Under the scenario where advanced economies are vaccinated universally within four months in 2021 but only 50% of the population is vaccinated in emerging markets and developing economies by early 2022, it finds that the global economic costs might be as high as $3.8 trillion.

Why markets are still efficient even with Tesla’s gains
Gerard O’Reilly (FT) Feb 16, 2021
Stock prices remain our best prediction of future amid continuing technological change.

Semiconductor cycle out of balance after customers stock up
Kathrin Hille (FT) Feb 16, 2021
Inventory levels rise as companies brace for supply disruptions.

The investment case for Chinese banks
David P. Goldman (AT) Feb 16, 2021
Government and some top-quality corporate bonds in the US, Europe and Japan now trade at negative yields. US junk bonds on average yield less than 4% for the first time in history.

Financial Reform Can Make the U.S. Stronger
Bloomberg View Feb 16, 2021
The pandemic has shown that the financial system is still too fragile. Here’s how President Biden should fix it.

The Silent Revolution in Economic Policy
Robert Skidelsky (Project Syndicate) Feb 16, 2021
With Western economies battered by COVID-19 and central banks running out of ammunition, fiscal policy is the only game in town. This should be openly acknowledged, and fiscal rules should be rewritten to allow for more active counter-cyclical policy and a much larger government role in allocating capital.

The cost of populism: Evidence from history
Manuel Funke, Moritz Schularick, and Christoph Trebesch (VoxEU) Feb 16, 2021
The rise of populism in the past two decades has motivated much work on its drivers, but less is known about its economic and political consequences. This column uses a comprehensive cross-country database on populism dating back to 1900 to offer a historical, long-run perspective. It shows that (1) populism has a long history and is serial in nature – if countries have been governed by a populist once, they are much more likely to see another populist coming to office in the future; (2) populist leadership is economically costly, with a notable long-run decline in consumption and output; and (3) populism is politically disruptive, fostering instability and institutional decay. The analysis suggests that populism is here to stay.

Part VIII: Debt Crisis in China
Jay Bryson and Brendan McKenna (WF Econ Group) Feb 16, 2021
In this eighth installment in our series on potential economic risk, we ask what would happen if the Chinese economy, which is the second largest in the world when measured in current U.S. dollars, were to experience a debt crisis in the near term.

U.K. and Japan: Steady Finish to 2020, Uncertain Start to 2021
Nick Bennenbroek, Jen Licis, and Brendan McKenna (WF Econ Group) Feb 16, 2021
The U.K. economy outperformed expectations in Q4, growing 1.0% quarter-over-quarter; however, some of the underlying details of the GDP report were less favorable. Government spending was largely responsible for the outperformance, while consumer spending turned negative in Q4, an unwelcome decline. With COVID restrictions reimposed for most of Q1, the near-term outlook for the U.K. economy remains challenging. However, the longer-term prospects are brighter as household finances continue to improve and could result in a pronounced rebound in consumer spending in a post-COVID world. Japan's economy also beat consensus forecasts in Q4 with the underlying details more constructive when compared to the United Kingdom. Despite a relatively strong Q4 our medium-to-longer term view for Japan is less encouraging. Current COVID restrictions are imposed on a significant portion of the economy, while household finances in Japan are not as strong currently as in the U.K. In order for the Japanese economy to gather longer-term momentum, additional fiscal stimulus may be required in an effort to support consumer spending. There are slight differences in our outlooks for the British pound and Japanese yen as we expect modest pound strength and gradual yen weakness over our forecast horizon. While the pound has already reached out medium-term target, we believe a renewed downturn in the U.K. economy will restrain the pound for now. In addition, a global economic recovery along with subdued medium-term prospects for the Japanese economy should reduce demand for haven currencies and also weigh on the yen over time.

How the WTO Changed China
Yeling Tan (FA) Feb 16, 2021
The mixed legacy of economic engagement.

Vaccinating the world is a test of our ability to co-operate
Martin Wolf (FT) Feb 17, 2021
It is also a trial of our enlightened self-interest and will need G20 leadership to succeed.

Yellen needs to tell Asian nations to stop currency manipulation
David Waddill (FT) Feb 17, 2021
US needs to take a tougher line so excess savings can be drawn down to stimulate global growth.

India’s farm reforms fail to tackle growers’ sluggish incomes
Amy Kazmin (FT) Feb 17, 2021
Agricultural transformation will not be achieved until consumers can afford to spend more.

How Joe Biden can help Britain modernise its role in the world
Robert Zoellick (FT) Feb 17, 2021
London’s course looks uncertain, but it offers opportunities to Washington.

Protectionism is back on the French economic menu
Didier Martin (FT) Feb 17, 2021
Food sovereignty is a poor reason to reject Canadian bid for retailer Carrefour.

Virtual control: the agenda behind China’s new digital currency
James Kynge and Sun Yu (FT) Feb 17, 2021
The planned ‘e-yuan’ could boost Beijing’s surveillance state and create competition for private fintech groups.

Europe’s Pandemic Debt Is Dizzying. Who Will Pay?
Liz Alderman (NYT) Feb 17, 2021
Pandemic aid has cushioned workers and businesses from a severe recession. But as governments face trillions in debt, there’s no rush to rein it in.

Indonesia wealth fund raises hopes, doubts and cash
John McBeth (AT) Feb 17, 2021
Chief executive candidates for Indonesia’s new sovereign wealth fund found themselves in a screening process hot seat when questioned how they would prevent a replay of Malaysia’s multibillion-dollar 1MDB scandal.

Why Climate Change Vulnerability Is Bad for Sovereign Credit Ratings
Serhan Cevik and João Tovar Jalles (IMF) Feb 17, 2021
Financial risks created by climate change are felt more acutely by developing economies.

Startups boom in the United States during COVID-19
Simeon Djankov and Eva (Yiwen) Zhang (PIIE) Feb 17, 2021
Despite a health catastrophe and one of the worst economic downturns in modern history, startup business activity grew in the United States last year—business startups[1] grew from 3.5 million in 2019 to 4.4 million in 2020, a 24 percent increase. The number of new businesses also increased in Chile, Turkey, and the United Kingdom. Other economies were not so vibrant: New business formation declined by a quarter in Portugal and Russia. Startup activity in China barely budged, growing by 3 percent in the first three quarters of 2020 relative to 2019.

Bond yields are not good predictors of inflation
Joseph E. Gagnon and Madi Sarsenbayev (PIIE) Feb 17, 2021
President Joseph R. Biden Jr.’s audacious proposal for $1.9 trillion in additional stimulus this year has generated concern among some, including former Treasury Secretary Lawrence H. Summers, that the package may overheat the US economy and cause inflation. Yet the bond market, often a place where such concerns are registered, does not seem worried. Current changes in bond yields suggest only a tiny rise in future inflation.[1] Could the markets be telling us something?

Continuing fiscal support and the risk of inflation
Maria Demertzis (Bruegel) Feb 17, 2021
Ongoing fiscal support in the United States is not expected to provoke inflation risks. There are no immediate inflationary risks in the euro area either.

How the Big Covid Rebound Keeps Getting Delayed, a Bit
Daniel Moss (Bloomberg View) Feb 17, 2021
Early stress tests in Asia show some important lessons for nuanced growth in 2021.

Miners Are Sending Mixed Super-Cycle Messages
Clara Ferreira Marques (Bloomberg View) Feb 17, 2021
BHP, Glencore and Rio Tinto see gains ahead as the world’s economy recovers from Covid-19. Yet not all their actions mirror market excitement.

Have Stimulus, Will Spend
Sarah Halzack (Bloomberg View) Feb 17, 2021
Blowout retail sales in January show government relief checks are working as intended to prop up spending and bolster the economy.

Will Inflation Make a Comeback?
Axel A. Weber (Project Syndicate) Feb 17, 2021
Economic forecasting models have long been notoriously inaccurate in predicting inflation, and COVID-19 has further complicated the challenge. Those who heed current consensus forecasts of persistently low price growth could be in for a rude awakening.

No Time to Waste
Bill Gates (Project Syndicate) Feb 17, 2021
Saving the planet from catastrophic climate change will require not only a dramatic increase in funding for clean-energy research and development. We need innovation in policy just as much as in technology.

India’s Farm Laws Are a Global Problem
Kaushik Basu (Project Syndicate) Feb 17, 2021
Market fundamentalism never works as well as actual markets do, because it offers “choices” that no one would willingly choose. The Indian government should repeal its new farm laws and, through a careful deliberative process, craft legislation that stands the test of reason and can benefit poor farmers and consumers most of all.

The Decarbonization Paradox
Kemal Dervis and Sebastian Strauss (Project Syndicate) Feb 17, 2021
Although faster technological progress can ease some of the social and political barriers to climate action, such innovation alone will not get the world all the way to net zero. To achieve that, drastic shifts in behavior and massive policy interventions will be required, including an unprecedented degree of international cooperation.

Robots and labour in the service sector
Karen Eggleston, Yong Suk Lee, and Toshiaki Iizuka (VoxEU) Feb 17, 2021
Firm-level studies are important for understanding how robots augment some types of labour while substituting for others, yet evidence outside manufacturing is scarce. This column reports on one of the first studies of service sector robots, which suggests that robot adoption has increased some employment opportunities, provided greater flexibility, and helped to mitigate turnover problems among long-term care workers. The wave of technologies that inspires fear in many countries may be a remedy for the social and economic challenges posed by population ageing in others.

Future Output Loss from COVID-Induced School Closures
John Fernald, Huiyu Li, and Mitchell Ochse (FRBSF Econ Letter) Feb 17, 2021
The COVID-19 pandemic has caused massive disruptions to the U.S. educational system. Research on school closures—particularly combined with parental income loss—implies that children are likely to attain lower levels of lifetime education compared with pre-pandemic trends. Projections show learning disruptions could lower the level of annual economic output ¼ percentage point on average over the next 70 years. The effect is small the first 5–10 years then peaks at a loss of ½ percentage point in about 25 years, when the children reach prime working age.

Europe needs Draghi’s reforms to succeed
FT View Feb 18, 2021
It is the duty of Italy’s warring politicians to support the new premier.

Investors also need to ‘act big’ as Yellen signals regime change
Ian Harnett (FT) Feb 18, 2021
Expansive fiscal and monetary policies may see 1980s-style Japanese melt-up and meltdown.

Coronavirus control and big spending prove a magic economic mix
Chris Giles (FT) Feb 18, 2021
But the economic winners and losers of 2020 may not be the same in 2021.

Why economists kept getting the policies wrong
Philip Stephens (FT) Feb 18, 2021
After decades of market liberalism and fiscal fundamentalism, policymakers are returning to Keynes.

Premature panic over Inflation and the Fed
David P. Goldman (AT) Feb 18, 2021
When will the Fed taper its multi-trillion bond-buying binge and let interest rates drift up again? That’s the to-be-or-not-to-be-in-stocks question worrying Wall Street strategists.

Public and Private Money Can Coexist in the Digital Age
Tobias Adrian and Tommaso Mancini-Griffoli (IMF) Feb 18, 2021
Public-private coexistence.

In defense of concerns over the $1.9 trillion relief plan
Olivier Blanchard (PIIE) Feb 18, 2021
Those economists (like myself) who agree with Treasury Secretary Janet Yellen about the need to “go big” on a protection and stimulus package, but who have misgivings about the size of the Biden administration’s $1.9 trillion coronavirus relief plan, are getting criticized as overly concerned about overheating and inflation. A healthy debate has erupted. This blog post addresses three main issues in that debate and explains why I am concerned: first, the size of the output gap—i.e., the gap between actual and potential output in the economy; second, the size of the multipliers—i.e., the likely effects from the stimulus; and third, how much inflation an overheating economy may generate.

Fixed Income: Low Yields Don’t Tell the Whole Story
Jamil Baz and Josh Davis (PIMCO) Feb 18, 2021
Bonds continue to offer numerous benefits and potential for appreciation.

The Real Battle for the City of London
Elisa Martinuzzi (Bloomberg View) Feb 18, 2021
Clearing is an important business, but the loss of EU “equivalence” elsewhere is potentially devastating.

Fretting About Inflation May Be Just the Cure We Need
Noah Smith (Bloomberg View) Feb 18, 2021
To stave off runaway price hikes, the country needs to be reassured that the Federal Reserve still has its hand on the leash.

Biden’s Immigration Plan Is Ambitious But Not Impossible
Shikha Dalmia (Bloomberg View) Feb 18, 2021
It will be hard to get Republican support in the Senate but parts of the bill can pass.

Indonesia Wants Fewer Babies. But Is It a Good Idea?
Daniel Moss (Bloomberg View) Feb 18, 2021
The world’s fourth-most populous nation plans to tap the brakes on births. That might become a curse.

Biden’s Good Start on China
Chris Patten (Project Syndicate) Feb 18, 2021
With US President Joe Biden restoring American support for multilateralism and international partnerships, the world’s democracies should be better placed to halt the Chinese government’s bullying. But China should be welcomed when it is prepared to be constructive on issues like climate change and antimicrobial resistance.

Boosting women’s labour-force participation to lift long-term growth
Stephanie Kelly, Abigail Watt, Nancy Hardie, and Jeremy Lawson (VoxEU) Feb 18, 2021
As populations age and labour productivity slows, policy agendas that support stronger diversity and inclusion measures could provide a much needed shot in the arm for the global economy. This column describes the constraints limiting women’s full participation in the workforce across a wide sample of countries, and suggests that governments looking to maximise growth prioritise paternity leave legislation, tax wedges, and employment protections. Policies targeting gender parity must focus not only on women’s labour-supply decisions but on men’s behaviour as well.

The tightening of bank equity capital regulation
Hans Gersbach (VoxEU) Feb 18, 2021
Since the financial crisis of 2007/08, bank equity regulation has been tightened. This is one reason why broad money supply reacted only weakly to the enormous expansion of the monetary base. This column argues that the process of tightening bank equity regulation has come to an end and will not have the same disinflationary effects after the pandemic. The large reserve balances held by banks may become a greater concern and pose larger inflation risks in the years to come.

Brazil: Economic Update and Outlook
Brendan McKenna (WF Econ Group) Feb 18, 2021
Brazil's economy may be entering a difficult period. Last week, activity indicators revealed a more pronounced slowdown in the economy as fiscal stimulus wears off; however, inflation continues to climb toward the upper end of the central bank's inflation target range. As far as economic activity, we assumed the tapering of fiscal stimulus would result in a sharp slowdown in the economy and revised our 2020 GDP forecast lower a few months ago. As fiscal stimulus wore off we believed inflation would cool as well; however, inflation keeps rising, and as a result, we believe the Brazilian Central Bank will look to tighten monetary policy in the near future. Policy rate increases could disrupt the local economy even further, especially at a time when the economy is already fragile and struggling to gather momentum.

What’s Trending: Inflation
Sarah House, Shannon Seery, and Sara Cotsakis (WF Econ Group) Feb 18, 2021
Inflation has again become a hot topic among analysts as they consider to what extent prices are set to rise once COVID is better controlled and the full effects of recent fiscal support take hold. In this report, we present three inflation scenarios in an attempt to construct a sensitivity analysis around how fast inflation could grow as the economy emerges from the COVID-downturn, and what the implications are for monetary and fiscal policy.

Too early to call a commodities supercycle
Jumana Saleheen (FT) Feb 19, 2021
Most of the factors driving the recent bull market are temporary in nature.

Structural Factors and Central Bank Credibility Limit Inflation Risks
Gita Gopinath (IMF) Feb 19, 2021
After ending last year with unexpectedly strong vaccine success and hope that the pandemic and economic distress it caused would recede, we woke up to the reality of new virus variants and the unpredictable, winding road that it can lead the world down.

Are U.S. Manufacturers Coming Home or Not?
Brooke Sutherland (Bloomberg View) Feb 19, 2021
There's some evidence that pandemic supply-chain disruptions are inspiring companies to bring factory work back to America. But only some.

The Draghi Power Triangle
Melvyn Krauss (Project Syndicate) Feb 19, 2021
Italy's new prime minister, Mario Draghi, is not solely someone whose credibility in financial markets can lower the Italian borrowing costs and boost Italian stock prices. As he showed in his maiden address, he is a student of history, with strong democratic values and strategic capabilities that Europe badly needs.

Are Cities Finished?
Carlo Ratti and Richard Florida (Project Syndicate) Feb 19, 2021
Far from rendering cities obsolete, as some predicted early on, the pandemic has unlocked an ever-broader potential for renaissance – what the economist Joseph Schumpeter famously called “creative destruction” on an urban scale. The potential rewards are enormous, but there are also considerable risks.

Growth Is Not Enough
Iqbal Dhaliwal and Samantha Friedlander (Project Syndicate) Feb 19, 2021
With an abundance of important and sometimes surprising findings from studies of socioeconomic interventions in recent decades, it is clear that development in the absence of evidence-based policymaking is a fool's errand. The small details matter as much as – and sometimes more than – the economic big picture.

Fiscal plans in Europe: No divergence but no coordination
Vincent Aussilloux, Adam Baïz, Matthieu Garrigue, Philippe Martin, and Dimitris Mavridis (VoxEU) Feb 19, 2021
The Covid-19 crisis has presented policymakers across the euro area with an unprecedented challenge, not least of all because the shock has come to both the supply side and the demand side of the economy. This column presents a preliminary analysis of different nations’ responses so far, focusing on which measures have been deployed to address each side of the economic shock and where a ‘mixed approach’ has been taken to work in tandem. At a time where coordinated action may be needed, there is a concerning level of inconsistency in strategy.

Should equity investors worry about rising interest rates?
Michael Mackenzie (FT) Feb 20, 2021
Stocks can benefit from rising earnings as economy recovers from the Covid pandemic.

The dangers of today’s low-yielding, high-yield market
Joe Rennison (FT) Feb 20, 2021
There are risks in buying corporate junk bonds that offer the same returns as US Treasuries did two years ago.

The Boredom Economy
Sydney Ember (NYT) Feb 20, 2021
The pandemic is terrible. It can also be tedious. And that tedium is shaping what people buy and how productive they are.

The Spactacular boom on Wall Street
Economist Feb 20, 2021
Are SPACs a useful innovation, a mania, or both?

The geography of innovation between 1866 and today
Mike Andrews and Alexander Whalley (VoxEU) Feb 20, 2021
We have witnessed significant changes in economic geography over the last years. However, little is known about the spatial concentration of innovation over time. This column uses a novel dataset containing the location of all US patents between 1836 to 2016 to analyse the geography of innovation over time. It finds that while concentration was a high as it is today in the late 1860s, it has seen a substantial decline thereafter, remaining at significantly lower levels for the larger part of the 20th century. It further finds substantial turnover in the identities of top inventing places.

Why once successful countries like the UK get left behind
Martin Wolf (FT) Feb 21, 2021
As a nation loses its ability to innovate, it starts to stagnate.

Nikkei 30,000 brings back memories of 1980s mania
Leo Lewis (FT) Feb 21, 2021
The index’s continued rise suggests retail investors are changing Japan’s markets.

Covid’s health legacy demands radical revamp of welfare systems
Kate Allen Feb 21, 2021
Advanced economies must do more to help those with long-term conditions keep jobs.

Is Democracy in Decline Globally?
Frank Vogl (Globalist) Feb 21, 2021
Corruption and debt darken the global outlook for democracy.

Biden’s brief window to fix the world’s broken institutions
Adam Triggs (EAF) Feb 21, 2021
Use Indonesia’s upcoming G20 host year in 2022 to strengthen the multilateral institutions that Asia relies upon and which underpin long-term US influence in the region.

Institutions and power structure
Ruixue Jia, Gérard Roland, and Yang Xie (VoxEU) Feb 21, 2021
Property rights and the rule of law were weaker in Imperial China than in premodern Europe. And yet, ordinary people in Imperial China had more access to elite status than their European counterparts. This column makes sense of the seeming contradiction by employing a theory of power structures in which a more symmetric relationship between elites and ordinary people stabilizes autocratic rule. If a ruler’s power is absolute, this stabilising effect will be stronger, and the ruler’s incentive to promote such symmetry will be greater.

Subnational governments and the making of development in Africa
Yohan Iddawela, Neil Lee, and Andrés Rodríguez-Pose (VoxEU) Feb 21, 2021
Differences in the quality of local and regional governments and their implications for development have attracted considerable attention, especially in Europe and Asia. In Africa, the recent drive towards decentralisation has, however, neglected how variations in the quality of sub-national governments affect development prospects. This column addresses this gap in knowledge by measuring variations in subnational government quality in 22 African countries, and connecting these variations to differences in levels of development across the continent. The quality of sub-national governments is an important driver of economic development in African regions.

Europe should ‘go big’ on fiscal policy too
FT View Feb 22, 2021
Stimulus from governments falls short compared with the US despite a deeper recession.

Bond trading finally dragged into the digital age
Robin Wigglesworth (FT) Feb 22, 2021
Shift of fixed-income markets from analogue to electronic speeds up.

Inflation jitters ignore warning from Japan
William Pesek (AT) Feb 22, 2021
Anyone losing sleep over a coming surge in inflation can find all the reassurance they need in Tokyo. The so-called “bond vigilantes” are suddenly fretting about a 1.4% US inflation rate.

What to do about the European Union's fiscal rules
Olivier Blanchard, Álvaro Leandro, and Jeromin Zettelmeyer (PIIE) Feb 22, 2021
For more than three decades, fiscal policies of members of the European Union (EU) have been constrained by increasingly complex rules built around common debt and deficit targets, known as the Stability and Growth Pact. Faced with the historic shock resulting from the COVID-19 pandemic, the EU suspended the rules until at least end-2021. There is broad agreement that the rules will need to be reformed before they are reinstated—because of the high levels of debt incurred during the pandemic, but also to address longstanding flaws.

Saving in US dollars doesn't yield highest returns in inflation targeting countries
Madi Sarsenbayev (PIIE) Feb 22, 2021
For more than 30 years, dozens of countries around the world have experienced painful episodes of rampaging inflation. Many have adopted a monetary policy known as inflation targeting (IT) requiring them to ramp up interest rates that have decelerated inflation at the cost of sometimes drastic economic slowdowns. Separately, policymakers have generally accompanied inflation targeting with often large fluctuations in exchange rates as they have had to choose between stabilizing inflation or exchange rates. This volatility has compelled savers in some IT countries to invest their savings in US dollars or other major currencies to avoid losing value in case their home currency weakens.

Solidarity and Cooperation: Europe’s Response to the Crisis
Kristalina Georgieva (IMF) Feb 22, 2021
My deepest concern: that the Great Lockdown of 2020 could morph into a Great Divergence in 2021.

The Post-Brexit Bull Case Is Getting Stronger
John Authers (Bloomberg View) Feb 22, 2021
Britain shot itself in the foot; it didn’t shoot itself in the head.

China’s Weaponization of Rare Earths Is Bound to Backfire
David Fickling (Bloomberg View) Feb 22, 2021

How China Copied South Korea All Wrong
Shuli Ren (Bloomberg View) Feb 22, 2021
Chinese conglomerates admire the corporate model developed by their neighbor but it does not work in a superpower addicted to opaque governance and hobbled by regulatory loopholes.
Beijing’s past attempts to cut off supply have only given rise to alternative sources. Limiting access to the technology that refines these metals is even more misguided.

The Case for Post-Pandemic Pessimism
Mervyn Allister King (Bloomberg View) Feb 22, 2021
Monetary and fiscal stimulus won’t restore a healthy world economy.

The Digital Transformation Strategy Africa Needs
Victor Harison and Mario Pezzini (Project Syndicate) Feb 22, 2021
Nurturing large-scale job creation in Africa will require policies that bring digital solutions to the non-digital economy. To reorient and strengthen their digitalization strategies, the continent's governments should follow four guiding principles.

The Limits to America’s Pent-Up Demand
Stephen S. Roach (Project Syndicate) Feb 22, 2021
Notwithstanding the predictable release of pent-up demand for consumer durables, face-to-face services show clear evidence of lasting scarring. Consequently, with the snapback for durables likely to be finished soon, even rapid vaccination is unlikely to shorten the tough time that lies ahead for the post-pandemic US economy.

Part IX: Another Housing Bubble in the United States
Jay Bryson, Mark Vitner, and Charles Dougherty (WF Econ Group) Feb 22, 2021
The sharp acceleration in home prices amid the COVID pandemic has raised concerns that the United States may be on the verge of another housing bubble. Is another housing bubble brewing and, if so, what would be the consequences if it were to implode?

Contrasting U.S. and European Job Markets during COVID-19
Jean-Benoît Eyméoud, Nicolas Petrosky-Nadeau, Raül Santaeulàlia-Llopis, and Etienne Wasmer (FRBSF Econ Letter) Feb 22, 2021
The onset of the COVID-19 pandemic and the unprecedented slowing of economic activity that followed caused severe disruptions to labor markets around the globe. In contrast to the United States, European Union countries funded short-time work programs to maintain jobs during a period of lockdown that was expected to be transitory. This succeeded in avoiding sharp increases in unemployment early in the recession. However, if the pandemic leads to a permanent reallocation of economic activity, short-time work programs may slow the process of workers moving from shrinking to growing sectors of the economy.

When is stimulus too much for markets?
Mohamed El-Erian (FT) Feb 23, 2021
What is good for more inclusive economic growth may not be positive short-term for investors.

Joe Biden can save global migration from the deep freeze
Janan Ganesh (FT) Feb 23, 2021
Through example and sheer numbers, an open US could bring an open world.

What the Bond Market Is Telling Us About the Biden Economy
Neil Irwin (NYT) Feb 23, 2021
A recent rise in interest rates hints that a recovery is on the way, but it could also mean harder choices ahead on spending.

Having Won Syria’s War, al-Assad Is Mired in Economic Woes
Ben Hubbard and Hwaida Saad (NYT) Feb 23, 2021
After a decade of war, the biggest threat now to President Bashar al-Assad is an economic crisis. But at a recent meeting, he had no concrete solutions to his country’s extreme distress.

China made it easier for the Fed to fight inflation, but those days are gone
Charles Lane (WP) Feb 23, 2021
A new book explains why the era of stable prices may be coming to an end.

How an Allocation of IMF SDRs To Africa Could Be Supported by A Multilateral Reallocation Initiative
Daouda Sembene (CGD) Feb 23, 2021
To support pandemic response in low-income countries (LICs), the case for a new allocation of IMF special drawing right (SDRs)s has been pervasively made in recent months. Building on a forthcoming CGD publication, this piece documents how such a move would specifically support Africa and how its lowest income countries could benefit from SDR reallocation by IMF largest shareholders.

Asset bubbles won’t help our post-pandemic recovery
Alicia García-Herrero (Bruegel) Feb 23, 2021
An unintended consequence of the virus has been ‘one of the wildest bull markets in recent economic history’ but a worsening of income distribution will have a negative impact further down the line.

Divergent Recoveries in Asia: History is not Destiny
Davide Furceri, Jonathan D. Ostry, and Anthony C.K. Tan (IMF) Feb 23, 2021
The expectation is for strong growth in Asia-Pacific in 2021 and 2022; but the aggregate figures mask an enormous range of output losses.

How Much Do Central Banks Fear the Bond Toddler?
John Authers Feb 23, 2021
So far, it looks like they will give the market what it wants.

Four Reasons Not to Worry About U.S. Inflation
William C Dudley (Bloomberg View) Feb 23, 2021
It’s probably headed higher, but that doesn’t mean it will get out of control.

Investors Are Too Exuberant
Jared Dillian (Bloomberg View) Feb 23, 2021
The bullish case for stocks is always the most compelling at market tops.

Central Banking’s Brave New World
Jean Pisani-Ferry (Project Syndicate) Feb 23, 2021
Leading central banks are now keen to take on responsibility for policy objectives they previously shied away from, such as reducing inequality and combating climate change. But explicitly amending the central banks’ missions would be preferable to letting monetary policymakers decide how their tasks should evolve.

America’s Excessive Government Spending Must Stop
George P. Shultz, John F. Cogan, and John B. Taylor (Project Syndicate) Feb 23, 2021
Before his death on February 6, George P. Shultz, a former US Secretary of the Treasury and Secretary of State, co-authored a final commentary warning of the dangers posed by the vast increase in US government spending in recent years, including during the COVID-19 crisis.

The pandemic and Greece’s debt: The day after
George Alogoskoufis (VoxEU) Feb 23, 2021
Greece experienced a deep recession in 2020, and pandemic relief measures have led to further increases in its exorbitantly high public debt. This column outlines three potential methods for dealing with increasing debt after the crisis: (1) increases in taxation/reductions of government spending, (3) debt restructuring and (partial) debt write-offs, or (3) a policy of ‘gradual adjustment’ in which economic growth helps the debt burden shrink relative to GDP over time. The precise policy mix will involve significant coordination among euro area countries, but Greece must also implement domestic reforms to facilitate a dynamic and sustainable recovery.

Shaping Africa’s post-Covid recovery: A new eBook
Rabah Arezki, Simeon Djankov, and Ugo Panizza (VoxEU) Feb 23, 2021
With the exception of some flashpoints in Northern and Southern Africa, the continent has been largely spared from the direct health effect of Covid-19. However, the African economy has been significantly hurt by the economic consequences. This eBook summarises recent research on the economic effect of the Covid-19 pandemic in the continent covering a wide array of topics focusing on the response of firms, households, governments, and international organisations.

Emerging Markets Asset Allocation: Investing Into the Upswing
Pramol Dhawan and Vinicius Silva (PIMCO) Feb 23, 2021
The global economy appears to be entering a new expansion phase, fueled by significant ongoing monetary and fiscal policy support. Broadening growth and abundant liquidity tend to drive capital toward emerging markets. Potential gains have historically been one of the best in this young cycle setting, favoring local assets (FX, equities, rates) over external credit (sovereigns and corporates). We anticipate these benign macro “push” factors to remain in place for an extended period of time and advocate increasing allocations to EM assets. Risks to our outlook include an early reversal to easy financial conditions and disruption in containing or ending the pandemic.

International Economic Outlook: February 2021
Nick Bennenbroek, Brendan McKenna, and Jen Licis (WF Econ Group) Feb 23, 2021
The selloff in government bond markets has intensified over the past month, with sovereign yields rising at a rapid pace. Within the United States, reflation expectations coupled with prospects for quicker growth have pushed U.S. Treasury yields to levels last seen in February 2020, and government bond yields have risen internationally as well. Higher bond yields are a double-edged sword. On one hand, the rise in yields should be interpreted as a signal market participants are confident in the global economic recovery. However, yields pushing higher could also place pressure and lead to less favorable financial conditions than have been in place over the past year. Despite growth and reflation prospects, we think it is unlikely major central banks raise policy rates or taper asset purchase programs. We believe the rise in U.S. Treasury yields will support the U.S. dollar in the short term; however, with the Fed on hold for the foreseeable future and likely allowing inflation to move higher, we believe more negative real interest rates will place downward pressure on the U.S. dollar over the medium to longer term.

Innovation is a Geographically Localized and Temporary Phenomenon
Matt Ridley (Discourse) Feb 23, 2021
China may now be the most innovative place on earth, but India may soon replace it as the world’s innovation leader

Joe Biden’s $1.9tn package is a risky experiment
Martin Wolf (FT) Feb 24, 2021
It might be no bad thing if the US fiscal stimulus ended up somewhat smaller than now proposed.

Rich countries should reassign funds to Africa as the path out of Covid
Vera Songwe (FT) Feb 24, 2021
A voluntary shift of special drawing rights on the IMF’s proposed $500bn of new liquidity is needed.

Fed needs to ignore ‘taper tantrums’ and let longer rates rise
Richard Bernstein (FT) Feb 24, 2021
Central bank should take its cue from a baby sleep training technique.

Why optimism about the economy is so important
Diane Coyle (FT) Feb 24, 2021
Expectations for what happens to the economy shape our decisions today — and so shape the future.

The yuan is on a tear, but is it sustainable?
William Pesek (AT) Feb 24, 2021
In 2016, Chinese President Xi Jinping detailed a decade-long campaign to morph the yuan into a top-tier currency. That year, it scored a spot in the International Monetary Fund’s reserve currency basket alongside the dollar, yen, euro and pound.

The Great Divergence: A Fork in the Road for the Global Economy
Kristalina Georgieva (IMF) Feb 24, 2021
There is a major risk that most developing countries will languish for years to come.

Fiscal Spending Could Cause a U.S. Growth Spike – Compounding Investors’ Concerns on Inflation
Libby Cantrill and Tiffany Wilding (PIMCO) Feb 24, 2021
A large fiscal package geared toward pandemic relief will likely boost U.S. growth even further in 2021, but long-term inflationary risks are still balanced.

Frankfurt, We Have a Problem. Bond Yields Are Rising
Marcus Ashworth and Mark Gilbert (Bloomberg View) Feb 24, 2021
As U.S. Treasury yields drive European borrowing costs higher, Christine Lagarde may have to intervene to cap outright levels.

A Strong Dollar No Longer Suits U.S. Interests
Noah Smith (Bloomberg View) Feb 24, 2021
One way to help reduce the trade deficit would be to diversify the world's foreign exchange reserves.

No Easy Fix for Broken U.S. Chip Supply Chains
Brooke Sutherland and Tae Kim (Bloomberg View) Feb 24, 2021
President Joe Biden's recognition of the long-term problems in American manufacturing is an important first step. But it will take thoughtful spending to undo decades of underinvestment.

Stimulus Spending Might Do Nothing But Add More Debt
Ramesh Ponnuru (Bloomberg View) Feb 24, 2021
Stop obsessing about inflation and consider a more likely scenario.

Interest Rates Are Losing Their Relevance
Daniel Moss (Bloomberg View) Feb 24, 2021
A group of prominent economists have recommended that Switzerland’s central bank put less emphasis on this outdated policy tool. There’s a lesson for the rest of the world, too.

The Case for a Higher Minimum Wage
Daron Acemoglu (Project Syndicate) Feb 24, 2021
In their push to increase the US federal minimum wage from $7.25 to $15 per hour, President Joe Biden and his fellow Democrats are on solid ground not just economically but also politically. A higher wage floor would create an impetus for good jobs, which is precisely what Western economies are lacking.

Resetting US-China Trade Relations
Anne O. Krueger (Project Syndicate) Feb 24, 2021
Former US President Donald Trump’s bombastic, go-it-alone strategy toward China, particularly on trade, was fundamentally flawed. Because an open multilateral trading system benefits the entire global economy, the Biden administration’s surest route to lessening bilateral tensions runs through the World Trade Organization.

How to Cooperate with China
Andrew Sheng and Xiao Geng (Project Syndicate) Feb 24, 2021
With his plan to build a concert of democracies to contain China, US President Joe Biden is making a grave mistake. The US and China should each be doing their part to protect the global commons, not competing for global dominance.

Banking Across Borders: Are Chinese Banks Different?
Eugenio Cerutti, Cathérine Koch, and Swapan-Kumar Pradhan (VoxChina) Feb 24, 2021
Chinese banks have become the largest cross-border lenders to emerging markets and developing economies (EMDEs). Despite their different ownership structure, their type of global reach resembles that of advanced economies’ (AE) banks, with distance to their borrowing EMDEs less of a barrier than that of other EMDE banks and more like U.S. or European banks. While bilateral trade, FDI, and portfolio investment positively correlate with lending for most banking systems, Chinese banks’ lending to EMDEs also strongly correlates with trade (e.g., in line with patterns exhibited by U.S. banks), but not with FDI and, unlike other banks, it correlates negatively with portfolio investment.

How much capital should banks hold?
Caterina Mendicino, Kalin Nikolov, Juan Rubio-Ramirez, Javier Suarez, and Dominik Supera (VoxEU) Feb 24, 2021
Well-capitalised banks make the financial system more resilient to episodes such as the COVID-19 crisis. This column assesses how much capital would be optimal for banks to hold, taking into consideration the risk of banking crises driven by borrower defaults. It finds that capital requirements of around 15% provide the optimal trade-off between lowering the frequency of banking crises caused by borrower defaults and maintaining the availability of credit in normal times. While the exact figure depends on a number of assumptions, it is higher than both the Basel III minimum and the optimum implied by macroeconomic frameworks that underestimate or neglect the impact of borrower default on bank solvency.

Part X: Significant Declines in Commercial Real Estate Prices
Jay Bryson, Mark Vitner, Charles Dougherty, and Nicole Cervi (WF Econ Group) Feb 24, 2021
In this penultimate installment in our series on economic risks, we look at the effects that the COVID pandemic may have on the commercial real estate market in the United States. We also ask whether these developments pose a risk to the U.S. economy.

Sovereign wealth funds are growing more slowly, and governance issues remain
Julien Maire, Adnan Mazarei, and Edwin M. Truman (PIIE) Feb 24, 2021
In the last two decades, sovereign wealth funds (SWFs)—funds accumulated by a government that are invested in whole or in part abroad to benefit the country in the future—have faced increased public scrutiny over their investment patterns, financial results, and governance. This Policy Brief updates and expands a prototype scoreboard rating the transparency and accountability of SWFs, which Truman established in 2007. This fifth edition of the scoreboard shows that the average scores continued to improve for the 64 SWFs examined, but governance issues remain. New funds have emerged—many of them government holding companies or strategic investment funds—but the growth of assets under management by SWFs has slowed, in some cases partly because of withdrawals to help finance expenses related to the COVID-19 pandemic, raising questions about their future role.

Let the market determine bitcoin’s value
J. Christopher Giancarlo (FT) Feb 25, 2021
Well-regulated trading is the best way to sort though conflicting views of the currency’s worth.

We have a chance to build a consensus on AI rules and norms
Jeremy Fleming (FT) Feb 25, 2021
GCHQ director argues data give a strategic and economic advantage but can be used for ill as well.

Carbon bulls will not wait on the EU
David Sheppard (FT) Feb 25, 2021
Prices for pollution allowances surge in anticipation of tighter emission standards.

Yellen’s steeper yield curve lets banks finance the huge US budget deficit
David P. Goldman (AT) Feb 25, 2021
An off-hand comment by Treasury Secretary Janet Yellen that “issuing longer-term securities certainly seems to make some sense” February 22 aggravated the sharp sell-off in long-term Treasury securities and widened the differential between shorter and longer maturity bonds.

Inflation fears and the Biden stimulus: Look to the Korean War, not Vietnam
Joseph E. Gagnon (PIIE) Feb 25, 2021
The debate among economists over the size of President Joseph R. Biden Jr.’s proposed $1.9 trillion stimulus package has drawn attention to past cases of inflation spurred by big government spending. Both sides have cited the Vietnam War of the 1960s as a precedent of an outbreak of inflation that would be difficult to reverse. Looking to the past can be misleading, however. The spending boom of the late 1960s—fueled not only by the war but by the Great Society programs—was long-lasting, whereas the Biden plan is a temporary response to a crisis. Moreover, the Federal Reserve’s passivity in the face of rising inflation in the 1960s is not likely to be repeated. A better historical analogy may be the large but temporary surge in inflation in 1951, related to the Korean War, which did not pose any lasting damage to the US economy.

How is the G20 tackling debt problems of the poorest countries?
Suman Bery, Alicia García-Herrero and Pauline Weil (Bruegel) Feb 25, 2021
The G20 Debt Service Standstill Initiative, although a partial success, has been dogged by competing interests and lack of coordination. A further push is needed to solve the coordination problem.

Why the Dollar Is More Robust Than It Looks
Richard Cookson (Bloomberg View) Feb 25, 2021
The U.S. will probably grow faster than the rest of the developed world this year and relative rate expectations will rise. Plus the EM trade is crowded.

The EU Should Ditch Its Fiscal Rules and Try This
Andreas Kluth (Bloomberg View) Feb 25, 2021
All sorts of financial rules are becoming too rigid and complex for the real world. There’s a better way to regulate.

U.K. Assets Are Rationally Exuberant, for Now
Mark Gilbert (Bloomberg View) Feb 25, 2021
The pound, gilt yields and stocks are on a tear amid plans to lift lockdown. Investors should keep sight of the things that can go wrong.

Inflation Is Uncontainable But Not Inevitable
Tyler Cowen (Bloomberg View) Feb 25, 2021
Even if there are price increases, they’re unlikely to be steep.

A Metal Bull Run Isn’t a Super-Cycle
Clara Ferreira Marques (Bloomberg View) Feb 25, 2021
High hopes for a greener economy and recovering demand are pushing up bellwether commodities. That doesn’t mean there’s enough to sustain years-long gains.

The Fed May Need to Head Off a Money-Market Mess
William C Dudley (Bloomberg View) Feb 25, 2021
Some short-term interest rates could go negative unless the central bank acts.

Fixing the Supply Chain Will Help Beat Inflation
Conor Sen (Bloomberg View) Feb 25, 2021
The focus should be on bolstering production, not worrying about price increases that are a normal part of the business cycle.

Bitcoin Rally Sends 3 Signals to Governments
Mohamed Aly El-Erian (Bloomberg View) Feb 26, 2021
The drivers behind the surge will impact the design and effectiveness of economic policies.

Fed's Digital Dollar Would Look Nothing Like Bitcoin
Noah Smith (Bloomberg View) Feb 25, 2021
Fedcoin wouldn't need the massive computations of cryptocurrencies, but it would effectively nationalize the payment industry, competing with banks, credit cards and Venmo.

Why the US Should Pursue Cooperation with China
Jeffrey D. Sachs (Project Syndicate) Feb 25, 2021
Cooperation is not cowardice, as American conservatives repeatedly claim. Both the US and China have much to gain from it: peace, expanded markets, accelerated technological progress, the avoidance of a new arms race, progress against COVID-19, a robust global jobs recovery, and a shared effort against climate change.

Winners and Losers in the Digital Transformation of Work
Michael Spence (Project Syndicate) Feb 25, 2021
Advances in artificial intelligence and machine learning have again raised fears of large-scale job losses. And while labor-market adaptation is likely to stave off permanent high unemployment, it cannot be counted on to prevent a sharp rise in inequality.

Pulling Up the Inflation Anchor
Robert J. Barro (Project Syndicate) Feb 25, 2021
Rather than worrying about the prospects of higher long-term expected inflation, the US Federal Reserve is exuding confidence that it can maintain price stability should the need ever arise. It should think again, before the inflation genie has escaped from the bottle.

Markets set for a bumpy ride back to inflation
FT View Feb 26, 2021
Expectations of rising prices are no cause for macroeconomic worries.

Are US stocks too pricey for UK investors?
Simon Edelsten (FT) Feb 26, 2021
With a market of 6,000 listed companies, look beyond the mega-caps for better value and growth prospects.

The Biden Economy Risks a Speeding Ticket
N. Gregory Mankiw (NYT) Feb 26, 2021
The administration’s proposed $1.9 trillion stimulus package may be too much for safety, an economist says.

A tantrum without tapering
David P. Goldman (AT) Feb 26, 2021
Stocks fell sharply in Thursday’s New York session after bond “real,” or inflation-protected component of Treasury yields rose sharply. The inflation component of bond yields actually shrank a bit.

China is deindustrializing but has a way to go to match other upper-middle-income economies
Mary E. Lovely (PIIE) Feb 26, 2021
In 2012, China’s industrial employment growth stopped. In subsequent years, the Chinese economy began deindustrializing. Industrial employment as a share of total employment declined as the sector shed millions of jobs.

Tourism in a Post-Pandemic World
Aleksandra Babii and Sanaa Nadeem (IMF) Feb 26, 2021
Tourism continues to be one of the sectors hit hardest by the COVID-19 pandemic, particularly for countries in the Asia-Pacific region and Western Hemisphere. Governments in these regions, and elsewhere, have taken measures to ease the economic shock to households and businesses, but longer-term the industry will need to adapt to a post-pandemic “new normal.”

Defending Democracy Is a Job for the World, Not the West
Mihir Sharma (Bloomberg View) Feb 26, 2021
U.S. President Joe Biden should recognize that countries elsewhere need to be key allies in the fight.

Biden’s Stimulus Trade-Offs
Koichi Hamada (Project Syndicate) Feb 26, 2021
Former US Treasury Secretary Larry Summers has been making the case that Joe Biden's COVID-19 relief plan is so large that it will likely trigger inflation. But his argument has a few glaring flaws – beginning with its failure to appreciate just how badly Americans need support today.

Can America Escape the Stimulus Trap?
Shang-Jin Wei (Project Syndicate) Feb 26, 2021
The United States risks locking itself into a recurring cycle of expansionary monetary and fiscal policies, rising asset prices, and redistributive measures that weaken investment and job growth. Avoiding this scenario will require three complementary reforms to accompany future economic stimulus packages.

Evolution, Not Revolution, in Economics
Andrés Velasco (Project Syndicate) Feb 26, 2021
A growing acceptance of aggressive fiscal policy is supposed to be the first principle of a new, post-revolutionary regime in macroeconomics. But the only genuine conceptual change in the decade since the global financial crisis has come from efforts to explain when and why "unconventional" monetary policy works.

An Open Letter to Joe Biden on International Corporate Taxation
José Antonio Ocampo, Joseph E. Stiglitz, and Jayati Ghosh (Project Syndicate) Feb 26, 2021
For too long, international institutions have failed to address one of the most toxic aspects of globalization: tax avoidance and evasion by multinational corporations. Fair taxation of multinationals must be a central part of any tax system aimed at driving economic growth and creating high living standards for all.

Friedman vs Phillips: A historic divide
Manoj Pradhan and Charles Goodhart (VoxEU) Feb 26, 2021
Milton Friedman and Bill Phillips most likely assumed that their separate methods for predicting inflation would lead to much the same outcomes. Recently, however, monetary aggregates and the Phillips curve have provided extremely disparate signals. This column discusses recent economic developments leading to these disparate signals, concluding that inflation will most likely end up somewhere between the predictions of the two models – which is almost certainly higher than what central banks and the IMF are expecting.

What happens if bitcoin succeeds?
Jon Danielsson (VoxEU) Feb 26, 2021
As the price of bitcoin continues to rise, this column argues that most of us would not want to live in a society where bitcoin succeeds. Fortunately, the internal contradictions and perverse consequences of cryptocurrencies success mean that they are destined for failure. Until then, it might make sense for speculators to ride the cryptocurrency bubble, so long as they get out in time.

Financials may be a silver lining in bond market rout
Michael Mackenzie (FT) Feb 27, 2021
Rising longer-term rates should boost profitability after many difficult years for sector.
As the price of bitcoin continues to rise, this column argues that most of us would not want to live in a society where bitcoin succeeds. Fortunately, the internal contradictions and perverse consequences of cryptocurrencies success mean that they are destined for failure. Until then, it might make sense for speculators to ride the cryptocurrency bubble, so long as they get out in time.

Bitcoin cannot replace the banks
Brendan Greeley (FT) Feb 27, 2021
Cryptocurrency hopes are based on a misunderstanding of how money is created.

Bond turmoil heralds end of the standard portfolio
Merryn Somerset Webb (FT) Feb 27, 2021
If fixed-income no longer offers stability, look elsewhere for protection from equity volatility.

The sad, quiet death of Brazil’s anti-corruption task-force
Economist Feb 27, 2021
The winding up of Lava Jato is a victory for the old politics.

Bitcoin, Gold, and the Rush to National Digital Currencies
Brendan Brown (Mises Wire) Feb 27, 2021
A money which can be held in only one form, whether digital coin (as in the case of bitcoin), or banknote, or sight deposit, or metallic coin, for example, is crippled. Yet, exclusive digital form has become a huge selling point for the promotors of bitcoin.

The Most Important Number of the Week Is 91.3
Robert Burgess (Bloomberg View) Feb 27, 2021
Consumer confidence figures temper the optimism for strong economic growth this year.

The comeback of ‘r > g’
Roberto Iacono and Elisa Palagi (VoxEU) Feb 27, 2021
A crucial element in the study of wealth inequality is the difference between the rate of return and the growth rate of income. However, the focus on these measures at the aggregate level belies important heterogeneities along the wealth distribution. This column uses rich micro-data from Norway to show that wealthy households enjoy higher rates of return relative to growth, while the opposite is true for poorer household and the lower-middle-income class. It discusses policy implications of these findings for capital and wealth taxation in order to curb the rise of inequality.

The end of the party looms for markets high on stimulus
Ruchir Sharma (FT) Feb 28, 2021
An economic boom could make last year’s gains go flat for investors.

The IMF no longer functions as the world’s safety net
Ousmène Jacques Mandeng (FT) Feb 28, 2021
The fund has deployed just 10% of its capacity during the pandemic, though it says it is ‘ready to help’.

The Private Equity Party Might Be Ending. It’s About Time.
William D. Cohan (NYT) Feb 28, 2021
A recent legal decision may force Wall Street to think twice before saddling struggling companies with debts they can’t handle.

Global vaccination is still a jab in the dark
Jeremy Youde (EAF) Feb 28, 2021
Two attempts to deliver international assistance and international cooperation cooperation are COVAX and so-called ‘vaccine diplomacy’.

Don’t Believe the U.S. Energy Independence Hype
Julian Lee (Bloomberg View) Feb 28, 2021
Simply producing more than you consume might qualify as self-sufficiency, but not true independence.