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Sticky expectations: A unified explanation for bond and currency puzzles

High short-term interest rates predict domestic currency appreciation and low excess returns for long-term bonds. These facts are at odds with two textbook conditions describing the relationship between different maturity interest rates and exchange rates: uncovered interest parity (UIP) and the expectations hypothesis. This column explains that both conditions can be reconciled with the data if agents are assumed to have sticky rather than perfe

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Unified state and federal policies could have prevented two-thirds of COVID-19 deaths in the US

Could restrictions at the federal level have slowed the spread of COVID-19 in the US? This column addresses this question using a novel,multi-region epidemiological modelthatcalculates the number of deaths that would have resulted from the federal government mirroring the policies of those states with the earliest and most rigorous restrictions.It finds thatby late September 2020, more than two-thirds ofthe country‘sCOVID-19 deaths could ha

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The expanding gender gap in the US due to Covid-19

The rebound in jobs for men in the US was swift after the initial weeks of the Covid pandemic, but not so for women. This column highlights three areas for change toalleviate the burden on working women in the US. First, legal changes are neededto both federal and state-level regulation, with a particular focus on parental leave and pension rules. Second, vocational training incentives with a particular focus on women are needed. Third, future re

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COVID-19, public procurement regimes, and trade policy

A prominent feature of the public policy response to COVID-19 has been the active use of trade policy instruments to enable access to essential supplies. This columnfinds the use of export restrictions targeting medical products to be strongly positively correlated with characteristics of prevailing public procurement regimes. Membership of trade agreements encompassing public procurement disciplines is associated with actions to facilitate trade

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Lockdowns and UK economic performance

On 5 November, the UKentered its second lockdownin an attempt to contain the spread of Covid-19. This column reports on the latestCfM survey, in which the majority of the panel of assessed that lockdowns have caused limited economic damage beyond what the pandemic itself would have caused unabated, and that the economic costs of the current lockdown are limited relative to the milder measures employed this summer. Nearly a fifth of the panel beli

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Public preferences for prioritising a COVID-19 vaccine

With the news of promising Covid-19 vaccines on the horizon comes a new challenge. The initial supply will not be sufficient to vaccinate everyone and choices will need to made over distribution. This column presents the results of an experiment in Belgium investigating people‘s preferences regarding the distribution of a scarce vaccine.There was no one single strategy that was considered best by a large majority, but three strategies were

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Teacher allocation and school performance in Italy

Public spending on education in Italy has been falling for many years, limiting the hiring of new permanent teachers and thus raising the average age of teachers in the country. This column considers the effect of allocating permanent teacher contracts to older teachers on student performance in upper-secondary schools in Tuscany. The findings suggest that a higher proportion of older teachers in a school has a negative effect on student performa

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Managing the transition to a post-vaccine world

The prospect of an effective vaccine to Covid-19 in the near term makes it important to understand private and public incentives to suppress infection. This column examines how the expected arrival of a vaccine alters individuals‘ incentives to self-protect between now and the arrival of the vaccine, and how a benevolent social planner would prefer individuals to self-protect. It finds that individuals tend to ramp up self-protection in ant

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Making the European Green Deal really work

With its increasing ambition, the conceptual deficiencies of the European climate policy are becoming even more transparent especially its neglect of the systemic nature of the energy system. This column highlights three key elements of a more promising approach to European climate policy: (i) establishing a uniform carbon price as its central policy element, (ii) ending the confusion of objectives and instruments, and (iii) dropping its naivet

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Work, care, and gender across UK lockdowns

A growing body of research is making clear the unequal impact of the COVID-19 pandemic across gender. This column explores what the likely implications of a second lockdown in the UK are for gender equality at work and in the home. While previous school closures in the first lockdown may have led to positive changes in the organisation of the home in terms of men and women sharing childcare responsibilities, women nevertheless are disproportionat

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On the development of fiscal capacity: Insights from Africa

Why do large differences in tax revenues between states exist and persist? This column introduces a comprehensive new dataset of tax and revenue collection for all African polities from 1900 to 2015 to answer this central question. The results confirm the importance of democratic institutions and political stability, while de-emphasising the role of resource revenues. Overall, states in Africa have been able to build institutions for the collecti

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On the development of fiscal capacity: New insights from African data

Why do large differences in tax revenues between states exist and persist? This column introduces a comprehensive new dataset of tax and revenue collection for all African polities from 1900 to 2015 to answer this central question. The results confirm the importance of democratic institutions and political stability, while de-emphasising the role of resource revenues. Overall, states in Africa have been able to build institutions for the collecti

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Regulating Fintech in Europe: Lessons from Wirecard

The default of Wirecard highlights several problems in the regulation and supervision of Fintech companies, with regulatory holes in investor protection, customer protection, and financial stability. This column argues that since Fintech companies can be very complex, their oversight requires understanding their business model and combining regulation and supervision based on both entities and activities. The global reach of Fintechs also calls f

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Relabelling, retirement, and regret

Fiscal sustainability challenges have prompted governments to restructure public pension systems, including the focal retirement ages. This column shows that relabelling ‘early‘ and ‘normal‘ retirement ages in a 2005 reform in Finland changed people‘s retirement rate. Such relabelling allows policymakers to shape retirement behaviour with little fiscal cost. However, there is a marginal increase in regret among those

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Gravity with granularity

Much of world trade is dominated by a small number of large firms. Market power becomes problematic for the estimation of gravity equations because many policy interventions also influence market shares and hence prices and the value of trade flows. This column proposes a method to correct the resulting inaccuracies in gravity equation estimation by adjusting trade flows for market power effects by subtracting a correction term that depends on th

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Inequality in choice quality

Public policies that offer choices to consumers are on the rise. But it is not clear that everyone benefits equally from these choices. This column presents new evidence using data on health insurance choices in the Netherlands. It finds that markedly worse choices were made by individuals with lower education levels, in less analytical professions, and with little exposure to high-quality choices made by peers. This new dimension of inequality c

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A long-run perspective on the productivity slowdown: Spain since 1850

The current productivity slowdown in advanced economies has triggered a lively debate about its causes and remedies. This column takes a long-run perspective to study drivers of productivity expansion and stagnation in Spain during the last 170 years. It finds that the productivity slowdown coincided with resource reallocation towards sectors attracting less innovation, with low investment in intangibles and low investment-specific technical chan

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