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VoxEU.org – CEPR’s policy portal – was set up in June 2007 to promote "research-based policy analysis and commentary by leading economists". Vox's audience consists of economists working in the public sector, private sector, academia and media – as well as students of economics in the broad sense. Vox columns cover all fields of economics broadly defined and is widely read (the site receives about a half million page views per month).

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Managers are miscalibrated

August 20, 2016

Several decades of laboratory experiments on human subjects (often students) have revealed that individuals suffer from psychological biases which affect decision making. One particular bias that proved to be persistent across subject groups is miscalibration. Miscalibration is defined as excessive confidence about having accurate information (Alpert and Raiffa 1982, Lichtenstein et al. 1982, Ronis and Yates 1987, Kyle and Wang 1997, Moore and Healy 2008). Miscalibrated people overestimate the precision of their own forecasts or underestimate the variance of risky processes; in other words, their subjective probability distributions are too narrow.
There always exists a tension between psychological findings from the lab and their impact in the real world, especially in

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Growing importance of financial spillovers from emerging markets

August 19, 2016

International financial spillovers from emerging markets have increased significantly over the last 20 years. This column argues that growing financial integration of emerging economies is more important than their rising share in global trade in driving this trend, that firms with lower liquidity and higher borrowing are more subject to spillovers, and that mutual funds are amplifying spillover effects. Policymakers in developed economies should pay increased attention to future spillovers from emerging markets, particularly from China.

Financial spillovers occur when fluctuations in the price of an asset trigger changes in the prices of other assets. They can reflect both desirable effects (incorporation of news into prices) and less desirable ones

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A primer on helicopter money

August 19, 2016

Helicopter money is not monetary policy. It is a fiscal policy carried out with the cooperation of the central bank. That is, if the Fed were to drop $100 bills out of helicopters, it would be doing the Treasury’s bidding.
We are wary of joining the cacophony of commentators on helicopter money, but our sense is that the discussion could use a bit of structure. So, as textbook authors, we aim to provide some pedagogy. (For examples of previous writing, see Bernanke 2016, Baldwin 2016 and Buiter 2014).
To understand why helicopter money is not just another version of unconventional monetary policy, we need to describe both a bit of economic theory and some relevant operational practice. We use simple balance sheets of the central bank and the government to explain.
Friedman’s

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The oil market in the aftermath of the price slump

August 18, 2016

Oil prices have decreased by about 65% since their recent peak in June 2014 (Figure 1). This dramatic and largely unexpected (Baumeister and Kilian 2016) collapse in prices has sparked intense debate over the causes and consequences. Arguably, the dynamic adjustment has changed the oil market structurally, leaving it quite different from the past. In addition, the manner in which falling oil prices affect the global economy has changed in important ways.
A broader energy perspective is therefore now needed to comprehend oil’s long-term outlook. To this end, this column briefly answers seven questions about the oil market in the global economy.
Figure 1 Crude oil price (APSP)

Question 1: Is the slump attributable to a ‘supply glut’ or to ‘peak demand’?
The evidence suggests that

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Divorce and children’s long-term outcomes

August 18, 2016

A growing share of children live apart from one of their parents before reaching adulthood. Many policymakers are concerned about the welfare of these children who (partly) grow up in single-parent households. Numerous papers in various social science disciplines document a strong negative empirical association between parental divorce and a wide range of children’s outcomes. This general relationship is highly persistent, leaving the children of divorced parents economically and emotionally worse off, even in adulthood. Most scholars are aware that it is not clear to what degree this relationship is causal (see, e.g., Manski et al 1992, Painter and Levine 2000, Amato 2010, Bhrolcháin 2013, Gähler and Palmtag 2015). A number of confounding factors that provoke parental divorce –

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Brexit and wage inequality

August 16, 2016

Wage inequality was partly behind the vote for Brexit. This column shows how areas with relatively low median wages were substantially more likely to vote ‘Leave’, and discusses the likely implications of Brexit for wage inequality in the future. Inc…

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Nation building through foreign intervention

August 16, 2016

More bombs, more shells, more napalm: Nation building through foreign intervention Interventions in weakly institutionalised societies have been central to US foreign policy during the past half-century. Military strategies used during foreign interv…

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Brexit stress test

August 15, 2016

The UK’s Brexit referendum is providing us with the first significant test of our sparkling new regulatory system. Everyone knew about the referendum months in advance, giving them plenty of time to prepare. Yet, we are left with some fundamental que…

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Linkages between fiscal multipliers and positions

August 13, 2016

During the Great Recession of 2008-09, a number of countries around the world deployed fiscal stimulus to support activity. As a result, government debt and deficits increased in many countries, and they remain elevated (Huidrom et al. 2016a). Agains…

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Fiscal multipliers and fiscal positions: New evidence

August 13, 2016

During the Great Recession of 2008-09, a number of countries around the world deployed fiscal stimulus to support activity. As a result, government debt and deficits increased in many countries, and they remain elevated (Huidrom et al. 2016a). Agains…

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Brexit – a view from north of the border

August 13, 2016

Citizens of the UK voted to leave the EU, but voters in Scotland and Northern Ireland expressed a strong wish to remain. Taking a trade perspective, this chapter argues that resolving border issues will be central to finding a Brexit outcome that pre…

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Judicial efficiency and bank fragility

August 13, 2016

Fabio Schiantarelli, Massimiliano Stacchini, Philip E. Strahan 13 August 2016 Fabio Schiantarelli, Massimiliano Stacchini, Philip E. Strahan The long and deep recession after the financial and foreign debt crisis has left a legacy of non-performing l…

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Ireland and Brexit

August 12, 2016

Editors’ note: This column first appeared as a chapter in the VoxEU ebook, Brexit Beckons: Thinking ahead by leading economists, available to download free of charge here. Listen to Patrick Honohan discuss Ireland and Brexit in the Vox Talk interview…

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Ireland and Brexit

August 12, 2016

How can the Irish economy respond to being torn by between two neighbours by Brexit? Bob Denham (Econ Films) interviews Patrick Honohan (Trinity College Dublin) on what economic connections do and don’t need to be unpicked, from labour markets to man…

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Effects of benchmarks on international capital flows

August 12, 2016

The effects of benchmarks on international capital flows: The problems of passive investing In a context where investors hold increasingly globalised portfolios, the issue of which countries (and which securities) belong to relevant international ben…

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Immigration – the way forward

August 11, 2016

Editors’ note: This column first appeared as a chapter in the VoxEU ebook, Brexit Beckons: Thinking ahead by leading economists, available to download free of charge here. If the UK’s vote to leave the European Union was a vote against anything, it w…

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Egypt: Not as equal as the surveys say

August 11, 2016

Official estimates of income and consumption inequality rank Egypt as one of the world’s most equal countries. The estimates are derived from national household surveys that collect detailed income or consumption data for a sample of households, assu…

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The implications of Brexit for the City

August 10, 2016

Editors’ note: This column first appeared as a chapter in the VoxEU ebook, Brexit Beckons: Thinking ahead by leading economists, available to download free of charge here. In 2003, when assessing whether the UK should join the European single currenc…

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Immigrant entrepreneurship and employment growth

August 10, 2016

Immigration is among the hottest and most divisive topics in politics today. US presidential hopefuls Hilary Clinton and Donald Trump embody the discord surrounding these issues – Trump’s rhetoric states that immigrants replace and hurt American work…

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Resolution of financial market infrastructures

August 9, 2016

Financial market infrastructures (FMIs) are the backbone of the financial system. Although steps have been taken to make it less likely, if an FMI were to fail it could have catastrophic consequences for financial markets and the economy at large. Th…

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Brexit – what happens to banking?

August 9, 2016

The Brexit vote has created particular uncertainty for London, the EU’s largest financial centre. This column looks at the issues facing the UK’s banking sector in the wake of the referendum: the right to conduct cross-border activity in the EU in fu…

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Negotiating Britain’s new trade policy

August 9, 2016

Editors’ note: This column first appeared as a chapter in the VoxEU ebook, Brexit Beckons: Thinking ahead by leading economists, available to download free of charge here. [embedded content] For over four decades, the EU has managed most internationa…

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Brexit – What happens to banking ?

August 8, 2016

Would losing passporting really be a crisis for the City? Or could the finance sector find a way around newly-imposed restrictions? Bob Denham (Econ Films) asks Patricia Jackson (Atom, Ernst & Young) about the attractiveness of London,…

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Brexit: Lessons from history

August 8, 2016

Editors’ note: This column first appeared as a chapter in the VoxEU ebook, Brexit Beckons: Thinking ahead by leading economists, available to download free of charge here. [embedded content] The voters have opted for Brexit. It seems that the UK will…

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Foreign savings: No gain, some pain

August 8, 2016

In theory, a poor country with a low saving rate but good growth prospects can build up its capital stock by running a large and sustained current account deficit. This column asks whether this is feasible and productive in practice. A substantial nu…

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The Ten Commandments of an independent UK trade policy

August 8, 2016

Editors’ note: This column first appeared as a chapter in the VoxEU ebook, Brexit Beckons: Thinking ahead by leading economists, available to download free of charge here. Brexit means Brexit. Consequently, the UK must now formulate and execute an in…

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Growth and debt-to-GDP ratios

August 7, 2016

Most macroeconomists are familiar with an accounting framework whereby changes in the government debt-to-GDP ratio are split into the contributions of the primary fiscal surplus and the interest-growth rate differential times the debt ratio. This fra…

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