Carbon pricing, in the form of carbon taxes and emissions trading systems, is increasingly a centrepiece of countries’ emissions reductions strategies, but policymakers face a bewildering array of options and considerations. Getting the design basics right is critical, and entails ensuring pricing is robust in level and coverage, practical in administration, and addresses fiscal, distributional, and political economy objectives. This column discusses key design issues and to what extent they can be addressed under carbon taxes and emissions trading systems. 

Russia’s invasion of Ukraine in February 2022 has provoked wide-ranging financial and economic sanctions from the US, Europe, and various other countries worldwide. This column assesses the economic effects of almost two decades of earlier sanctions on Russian firms to shed light on the impacts of this new wave of sanctions. Sanctions adversely affect firm performance in general, yet there is no clear impact on energy and oligarch-related firms.

Since the onset of the Covid-19 crisis in 2020, the correlation between cryptocurrency and equities went from low and negative to consistently high and positive. This column proposes a new mechanism to explain this new relationship. With investor-level holdings from a bank offering both trading accounts and cryptocurrency wallets, it shows that retail investors’ net trading volumes of stocks and cryptocurrencies are highly positively correlated. Theoretically, this micro-level pattern translates into a cross-asset class correlation.

Global real rates are stuck at a low level, and until recently policy rates everywhere were effectively zero. Can we use historical data to explain why this happened, and to predict whether we will be back at the ZLB when inflation falls? Pierre-Olivier Gourinchas and Ricardo Reis talk to Tim Phillips.