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Parsing disagreement about future short-term interest rates

07/26/2022 Voxeu Analysis

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

07/25/2022 Voxeu Analysis

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

07/25/2022 Voxeu Analysis

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

07/24/2022 Voxeu Analysis

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.

Public versus secret voting in committees

07/23/2022 Voxeu Analysis

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.

Winter is coming: Energy policy towards Russia

07/23/2022 Voxeu Analysis

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.

How to design carbon pricing schemes

07/22/2022 Voxeu Analysis

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.

Social media and mental health

07/22/2022 Voxeu Analysis

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.

The impact of foreign sanctions on firm performance in Russia

07/22/2022 Voxeu Analysis

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.

The optimal inflation target: Views from 600 economists

07/21/2022 Voxeu Analysis

A key question for any inflation-targeting framework is what the inflation target should be. This column reports findings from a survey of leading economists from around the world on the inflation target and related monetary policy issues. Overall, there was a strong preference for the status quo, with participants seeming to perceive high costs in terms of credibility from changing the current inflation target. However, participants concerned about the zero lower bound on the nominal interest rate were more likely to favour raising the target.

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