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Strikes and local politics

Conflicts in the labour market are detrimental to economic growth and welfare. Sweden was among the countries with the highest incidents of industrial disputes in the 1920s, but experienced declining levels from the 1930s onward. Using Swedish data from 1919 to 1938, this column shows that towns with both powerful unions and strong Social Democratic presence experienced labour market peace. The results point toward the importance of labour market

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Foreign expansion, competition, and bank risk

There is a general consensus that lax monetary policy and banking globalisation were two critical factors behind the Global Crisis. This column explores how banks‘ decisions to enter foreign markets impacted their individual and systemic risk. Results from a sample of European banks suggest that banks‘ foreign expansions decreased risk from both an individual and systemic viewpoint. The findings cast doubt on the idea that banking glo

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Heterogeneous effects of trade agreements across product types

The negotiation of trade deals among distant trade partners is hot on policymakers‘ agendas as a means to facilitate integration into global supply chains. This column examines the impact of trade agreements at varying levels of distance across product types. Granular bilateral trade data show that the boost from trade agreements is smaller over longer distances, and that this is primarily driven through the channel of intermediate goods.

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Firm size, productivity, and pay in a service economy

The evidence that bigger firms pay higher wages and have higher productivity is mainly based on manufacturing, which nowadays accounts for a small share of the economy.Drawing on a unique micro-aggregated dataset, this column reveals that while the size premia for both wages and productivity are significantly weaker in market services than in manufacturing, the link between wages and productivity is stronger the most productive firms at the top a

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Re-emerging currency mismatches

A large share of Turkey‘s bonds are denominated in foreign currencies, and the Turkish lira has depreciated. This recalls the currency mismatches that contributed to many crises in the 1990s. The column argues that many emerging economies like Turkey‘s are better able to avoid these crises thanks to improved policies, such as inflation targeting, that have helped foster local currency bond markets. Emerging markets policymakers must n

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Testing with accountability improves student achievement

School systems increasingly use student assessments for accountability purposes. By combining accountability reforms with international student achievement data over the past 15 years, this column shows that the expansion of standardised testing with external comparisons has improved student achievement in maths, science, and reading, whileinternal testing or teacher inspectorates without external comparisons have not.

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The increasing faith in macroprudential policies

The Global Crisis was a catalyst for the adoption of macroprudential policies around the world. Using newly updated data, this column examines the adoption of macroprudential policy instruments from 2000 to 2017. Since 2015, advanced economies have on average been using more instruments than emerging economies and low-income countries. While some instruments seem to be effective, it remains to be seen whether this suite of policies can deliver ov

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Losing soft power lowers exports

The export consequences of a country‘s leadership style are one manifestation of ‘soft power‘.This column usesGallup‘s World Poll data and agravity model of trade to examine the link between theattractiveness of the US to foreigners under theTrump administration and US exports. The results suggest a decline in foreign approval of US leadership between 2016 (Obama‘s last year) and 2017 (Trump‘s first year) mayha

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Why central banks should not be inflation nutters

Previous studies have suggested that for central banks, a focus on inflation stabilisation is enough to stabilise other macroeconomic variables, and that focusing on economic activity can even be harmful. Using a model similar to those in use at central banks, this column studies the welfare implications of increasing the weight on economic activity in the central bank‘s objective. The results suggest that stabilising measures of economic a

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The government should target the stock market

Originally published inFebruary 2009, this column proposes a new paradigm to reconcile Keynesian economics with general equilibrium theory. It suggests that, just as it sets the fed funds rate to control inflation, the Fed should set a stock market index to control unemployment. This would not let every manufacturing firm and every bank fail at the same time ‘as a result of speculative movements in markets that serve no social purpose.&lsqu

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Using Benford‘s Law to detect tax fraud in international trade

Smuggling, along with other forms of border tax evasion, is a substantial problem around the world. This column uses Benford‘s Law, which holds that the leading digits in various types of numerical data are not uniformly distributed, to identify suspicious import flows. Results using Turkish data suggest that deviations from Benford‘s Law are consistent with higher rates of tax evasion. The approach could be employed by authorities to

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The effect of machine translation on international trade

Recent years have seen dramatic progress in the predictive power of artificial intelligencein many areas, including speech recognition, but empirical evidence documenting its concrete economic effects is largely lacking.This column analyses the effect of the introduction of eBay Machine Translation on eBay‘s international trade. The results show thatit increased US exports on eBay to Spanish-speaking Latin American countries by 17.5%. By ov

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Human capital externalities in China

Comparing China‘s per-capita GDP growth to the growth in years of schooling suggests a large role for human capital externalities. This column uses changes in the location of Chinese university departments in the 1950s to estimate that an extra year of schooling has been associated with 22.0% higher hourly wages across cities. Even so, the growth of Chinese education cannot explain the country‘s massive increase in earnings.

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