Analysis

Large firms react more strongly to macro shocks, and it matters

It is important to understand the micro drivers of the economy’s reaction to large macro shocks. This column uses French firm-level data from 1993-2020 to study the contribution of the largest exporters to aggregate export fluctuations. The authors find that top exporters explained over 40% of aggregate fluctuations and drove the export collapses during the Global Crisis and the pandemic. Moreover, the 2020 collapse of French exports was driven by the higher sensitivity of large firms to demand shocks rather than disruptions to global value chains.

The long-run labour market effects of the Canada–US Free Trade Agreement

Increased import competition has been found to depress labour market outcomes, leading to pessimism that classic gains from trade are worth the accompanying labour market disruptions. This column examines the effect of the 1989 Canada-US Free Trade Agreement. While Canadian workers suffered short-run displacement and earnings losses in response to increased import competition, long-run labour market outcomes, such as years worked and cumulative earnings, were largely unaffected.

Parsing disagreement about future short-term interest rates

Disagreement over future nominal interest rates is currently high, creating challenges for central banks. This column argues that the real neutral rate of interest has a slow-moving, long-run component as well as a short-run component. The long-run ‘natural rate’ is determined by demographic characteristics and income inequality, while the short-run ‘neutral rate’ can be affected by transitory economic shocks. In the current environment, the distinction might be important to explain part of the disagreement about future nominal short-term interest rates.

Measuring Ukraine’s private consumption during the war

As Russia’s invasion continues to ravage many parts of Ukraine, the flow of official statistical data has been erratic. This column outlines an alternative approach to measuring private consumption during war times, using aggregated bank micro-level data. Commercial banks have mostly remained operational during the war. Moreover, the electronic payment system has functioned unceasingly throughout the war period, providing stability of bank payments.

Ruble payments: Shielding the ruble from financial sanctions

There has been much debate over the intentions behind Russia’s March 2022 Presential Decree requiring gas importers to settle gas payments in rubles. This column argues that the scheme is intended to protect the Moscow Stock Exchange from financial sanctions. The decree requires not only that gas payments are settled in rubles, but also that the rubles are obtained on the exchange, making it indispensable to the transactions. This prevents the exchange being placed under sanctions without gas supplies being cut off.

The crime effect of refugees

The impact of refugees on socioeconomic outcomes in destination countries, including crime, can be significant. This column finds that the increase in the refugee population in Turkey led to an increase in the incidence of crime of between 2% and 4.75% per year, correspondsing to about 75,000-150,000 additional crimes per year. These results highlight the need to strengthen the social safety systems, take actions to counter the impact on the labour market, and provide support to the criminal justice system to mitigate the repercussions of massive refugee inflows.

Winter is coming: Energy policy towards Russia

The EU's response to Russia’s invasion of Ukraine has been divided on energy, which may pose challenges for European unity. This column discusses several proposals to make sanctions more effective and cheaper for European households and firms. It argues that a temporary import tariff on Russian oil along with a price cap on Russian gas would be an effective and feasible option. The import tariff would promote substitution to alternative sources, while the price cap would remove the high uncertainty about future price spikes.

Public versus secret voting in committees

Committees are often tasked with key decision making, yet a committee is not a singular unit but a group of individuals. This column provides a framework to assess the effect of making public individual votes in committees where members differ in competence and bias, and are concerned about external perceptions of their competence. While public voting attenuates the potential biases of competent members, secret voting attenuates the potential biases of incompetent members.

Social media and mental health

Over the last two decades, the mental health of adolescents and young adults in many countries has worsened considerably. This column looks at the role that social media has played in this, focusing on Facebook. Using the gradual expansion of the website across US colleges as a natural experiment, the authors find that students were more likely to report that mental health issues negatively affected their academic performance after Facebook was introduced at their college, with evidence suggesting that the effects operated through unfavourable social comparison.

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