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Monetary policy in times of uncertainty

Dealing with uncertainty about the state of the economy is one of the main challenges facing monetary policymakers. In recent years there has been an extensive debate on the value of some of the deep parameters driving the economy, such as the natural rate of interest and the slope of the Phillips curve, estimates of which are quite uncertain. This column argues that when facing uncertainty on the structural relationship among macroeconomic varia

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Worst-case deadweight loss: Theory and implications

The deadweight loss from a monopolist‘s not producing at all can be much greater than from charging too high a price. The column argues that the potential for this sort of deadweight loss is greatest when the market demand curve has a particular (Zipf) shape. Calibrations based on the world distribution of income generate this shape, with disturbing consequences for potential deadweight loss in global markets.

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Initial coin offerings: Fundamentally different but highly correlated

We should not expect a high correlation between ICO tokens and the price of Bitcoin or Ethereum given that they have very different business cases. This column demonstrates that this was indeed the case during 2007, but the moment the Bitcoin/Ethereum bubble burst, the correlation with ICOs increased and it remained high even when prices had stabilised. This may have been because the ICO market is still in its infancy and needs to mature, or it m

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Compliance and fairness in community-based taxation

The problem of tax compliance is as old as the levying of taxes. Innovations in tax administration that induce high compliance rates at reasonable cost are extremely important to governments. This column demonstrates how thetaille, a tax collection mechanism from medieval Paris, raised compliance by turning the social cost of tax evasion into a private one. It offers a tax collection model that is still relevant to governments today.

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Incorporating sustainability factors into macroeconomic analysis

As climate change worsens and the forces of populism gather, there is a strong argument for moving beyond narrow economic measures of national progress. This column presents a new indicator of progress that integrates environmental, social, and governance factors into growth analysis. Results show that the countries that have been able to blend economic dynamism with environmental, social, and governance dynamism are mostly developing economies.

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The impact of within-group conflict on trust and trustworthiness

The literature examining the effect of conflict on trust and trustworthiness has reached contradictory conclusions. This column studies the long-term behavioural impact of the Cultural Revolution in China, which was a major in-group conflict. It finds that the children and grandchildren of those who were mentally or physically abused during the Revolution are less trusting, less trustworthy, and less likely to be competitively inclined relative t

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Work of the past, work of the future

Labour markets in US cities today are vastly more educated and skill-intensive than they were 50 years ago, but urban non-college workers now perform much less skilled work than they did. This column shows that automation and international trade have eliminated many of the mid-skilled non-college jobs that were disproportionately based in cities. This has contributed to a secular fall in real non-college wages.

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Incarceration can be rehabilitative

Incarceration rates have tripled in the US andalmost doubled in Western Europeover the past 50 years. This column uses data on the criminal behaviour and labour market outcomes of every Norwegian to show that in contrast to the US, where incarceration appears to encourage reoffending and damages labour prospects, the Norwegian prison system is successful in increasing participation in job training programmes, encouraging employment, and discourag

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Brexit delay will not postpone deglobalisation

Many associate Brexit and the Trumpian trade wars with the start of a new phase of deglobalisation. This column argues thatwe should view them as symptoms rather than causes, as the world had already started to fundamentally change before either came on the horizon.Neither the delay to Brexit nor the extended pause in the USChina tariff war means that the risks of deglobalisation have diminished.

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Women‘s liberation as a financial innovation

Countries such as England, the US, Canada, and Australia granted property rights to married women in the 19th century. The column uses US census and economic data from the time to show that the impact was financial as well as social. Women kept more of their assets as cash in US states that granted these rights. This reduced interest rates and accelerated industrialisation in these regions.

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Why are schools segregated?

Our cities are diverse, but often the schools in these cities are less so. Bas van der Klaauw of VU University Amsterdam tells Tim Phillips that not necessarily where we live that creates school segregation.

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Low funding jeopardises the European Commission‘s innovation missions

The European Commission plans to spend about 120 billion on research and innovation under mission-oriented programmes between 2021 and 2027. This column shows that planned spending is small both relative to the total R&D spending of individual EU countries and relative to previous missions. In addition, there is a lack of clarity on how missions will be determined, designed and governed. Experiences in other countries suggest that the Commission

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EU-UK global value chain trade and the indirect costs of Brexit

EU and the UK production networks are highly integrated, and Brexit poses a threat to supply and demand linkages between the two economies. This columndescribes howthe effect of tariffs will be magnified due to back-and-forth trade across the Channel. This will increase production costs in the UK and, to a lesser extent, in the EU.

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