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Unfinished Business: The North Atlantic crisis and its aftermath

Nine years ago, Lehman Brothers collapsed and the economic world changed. This column introduces a new book that asks how the North Atlantic economy became so unstable that the failure of a medium-sized US investment bank could topple the entire North Atlantic region into deep recession, and the Eurozone into a depression. The answer lies in serial but different regulatory mistakes in Europe and the US starting in the 1980s.

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The forward guidance paradox

In New Keynesian models, a promise to hold interest rates lower in the future has powerful effects on economic activity and inflation today. This result relies on a strong link between expected future policy rates and current activity, and also a belief that the policymaker will make good on the promise. This column argues that a tension between both of these creates a paradox the stronger the expectations channel, the less likely it is that peo

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Kinship, cooperation, and culture

Daily life requires us to cooperate with a large number of potentially unrelated people. This column argues that cultural variation in the ways people cooperate with each other are empirically associated with fundamentally different religious beliefs, moral values, emotions of shame and guilt, social norms, and institutions. This suggests that various psychological, biological, and institutional mechanisms co-evolved to support specific social

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Economists respond to Juncker‘s State of the Union speech

The European Commission president‘s suggestion that joining the euro should be compulsory for all EU members is not well received by over three quarters of leading economists responding to the latest Centre for Macroeconomics and CEPR survey. This column also reveals how, when asked a broader question about the success of the common currency, half the experts think it has had more benefits than costs, while only a quarter think the opposite

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Ideas aren‘t running out, but they are getting more expensive to find

The rate of productivity growth in advanced economies has been falling. Optimists hope for a fourth industrial revolution, while pessimists lament that most potential productivity growth has already occurred. This column argues that data on the research effort across all industries shows the costs of extracting ideas have increased sharply over time. This suggests that unless research inputs are continuously raised, economic growth will continue

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The rise of robots in the German labour market

Recent research has shown that industrial robots have caused severe job and earnings losses in the US. This column explores the impact of robots on the labour market in Germany, which has many more robots than the US and a much larger manufacturing employment share. Robots have had no aggregate effect on German employment, and robot exposure is found to actually increase the chances of workers staying with their original employer. This effect see

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An empirical analysis of peer-to-peer lending

Over the past decade, there has been substantial growth in peer-to-peer lending through digital platforms, which come with unique benefits and risks compared with traditional funding and investment instruments. This column presents an empirical analysis of the two largest platforms in the US. The results show that various hard and soft information signals have emerged to address inherent information asymmetries. The growth of the sector was furth

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Banking reform nine years on

The general opinion expressed by those in the financial sector and its regulators is that reform since 2008 has got us to about the right place in terms of limits on bank leverage. But the majority view of economists outside the financial sector is that Basel III goes nowhere near far enough. This column argues that while it represents a huge improvement on Basel II, Basel III should be seen as a staging post, not an end-point, and built upon in

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Firm efficiency, foreign ownership, and CEO gender in corrupt environments

Bribery and corruption still present a significant cost to many countries today. This column examines how the efficiency of Eastern European private firms is affected by the level of corruption in their operating environment. An environment of high corruption has an adverse effect on firm efficiency, with ‘honest‘ firms typically foreign-owned and/or with female CEOs penalised even more.

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Firm efficiency, foreign ownership, and CEO gender

Bribery and corruption still present a significant cost to many countries today. This column examines how the efficiency of Eastern European private firms is affected by the level of corruption in their operating environment. An environment of high corruption has an adverse effect on firm efficiency, with ‘honest‘ firms typically foreign-owned and/or with female CEOs penalised even more.

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Alternative fr Deutschland‘s electoral success: The shadow of Nazi voting

Economists and political scientists alike have tried to provide explanations for the rise of populist parties across the globe. This column examines the role of history in explaining the recent rise of the far-right in Germany. It finds that municipalities with high vote shares for the Nazi party in the late 1920s/early 1930s had also higher vote shares for the right-wing Alternative fr Deutschland party in 2016/17 state elections, suggesting tha

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Fundamental errors in the voting booth

Psychologists have long documented that we over-attribute people‘s actions to innate characteristics rather than to circumstances. This column shows that when we commit this ‘fundamental attribution error‘ as voters, we over-ascribe politicians success to personal characteristics that merit re-election. Although this mistake can improve politicians‘ incentives in ordinary times, the theory also explains lack of institution

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Genetic diversity in high school and later-life outcomes

While diversity can lead to more innovation and better problem solving, it can also cause competition and conflict. This column examines the effect of genetic diversity among high school students in Wisconsin on their socioeconomic outcomes later in life. Genetic diversity is associated with more years of schooling, and higher job prestige and income. Students from more genetically diverse schools score higher on indexes of openness and extravers

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In a Great Recession, the case for flexible exchange rates is alive and well

The classic rationale for flexible exchange rates was that policymakers would be unconstrained by currency targets. The Great Recession, however, saw numerous central banks constrained instead by the zero lower bound. This column considers which exchange rate regime is best for small open economies in a global recession. The model suggests that if the source of the shock is abroad and foreign interest rates become constrained at their zero lower

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The midlife low in human beings

Most textbooks in social psychology teach students the idea that happiness and psychological wellbeing are essentially independent of age. Based on data on 1.3 million randomly sampled individuals across a large number of countries, this column argues instead that humans have a fundamental tendency to a midlife low which is apparently substantial and not minor. This puzzling phenomenon seems an important and fundamental one, and its existence sho

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