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81. Mapping banking centres globally since 1970

Author:
Emmanuel Mourlon-Druol
Publication Date:
07-2022
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
Brexit and the rise of China as a leading international economic power have revived discussions about the geography of banking centres. This paper analyses the geographical evolution of banking centres since the 1970s, based on a database constructed from a ranking of the top banks in the world created by The Banker magazine, a UK-based monthly publication specialised in international financial affairs. We describe both how the database was created and the ways in which it can be used to inform policy on money and capital markets. We address why the data can be used to proxy the size of International Financial Centres (IFCs) and the methodological limitations it may present. We find that banking consolidations and the evolution of the legal framework are more central to the changing geography of banking centres than economic and financial crises. We also highlight that, despite major shifts in global economic power, leading banking centres are hard to replace.
Topic:
Economy, Brexit, History, Fiscal Policy, and Banking
Political Geography:
Global Focus

82. COVID-19 in the European Union: health impacts and effects on economic activity

Author:
Leonardo Cadamuro, Scott Marcus, and Francesco Papadia
Publication Date:
07-2022
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
This paper quantitatively describes different aspects of the COVID-19 pandemics: new cases, hospitalisations, intensive-care admissions and deaths, while illustrating their changing relationships over time. It then assesses how the different variables have affected relevant sectoral and macroeconomic indicators. Finally, it concludes that, from an economic perspective, what matters when it comes to managing the pandemic is to prevent intensive-care admissions and deaths arising from COVID-19. The success of vaccination should be measured in terms of its ability to prevent the most serious consequences, rather than its ability to prevent infections and hospitalisations.
Topic:
Health, European Union, Economy, Macroeconomics, and COVID-19
Political Geography:
Global Focus

83. Real Effects of Climate Policy: Financial Constraints and Spillovers

Author:
Söhnke M. Bartram
Publication Date:
04-2022
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Climate change is among the most intensely debated socioeconomic issues of current times. As a response to potential catastrophic risks from climate change, governments around the world are pushing for various regulations to curb greenhouse gas emissions. However, there is far from a consensus on optimal policy approaches, and as a result, climate policies are highly fragmented across the jurisdictions in which they are designed and implemented. More importantly, it is unknown whether such localized yet uncoordinated policies are able to internalize potential externalities that may impede efforts to address climate change as a global phenomenon or simply distort allocations in the economy. For example, at the beginning of 2013, California became the first and only state to put a comprehensive mandatory carbon regulation in place in the form of a cap‐​and‐​trade system that applies universally to all industrial greenhouse gas emissions. Exploiting the introduction of the California cap‐​and‐​trade rule, we investigate the internal resource‐​allocation responses by firms and the real but unintended spillover effects of localized climate policies that arise from the importance of financial constraints. Our study analyzes the interplay between climate policy and firm behavior, and it informs policymakers regarding the effectiveness of climate regulation.
Topic:
Climate Change, Regulation, Economy, Business, and Carbon Emissions
Political Geography:
Global Focus

84. Leaning-against-the-wind intervention and the “carry-trade” view of the cost of reserves

Author:
Eduardo Levy-Yeyati and Juan Francisco Gómez
Publication Date:
10-2022
Content Type:
Working Paper
Institution:
The John F. Kennedy School of Government at Harvard University
Abstract:
For a sample of emerging economies, we estimate the quasi-fiscal costs of sterilized foreign exchange interventions as the P&L of an inverse carry trade. We show that these costs can be substantial when intervention has a neo-mercantilist motive (preserving an undervalued currency) or a stabilization motive (appreciating the exchange rate as a nominal anchor) but are rather small when interventions follow a countercyclical, leaning-against-the-wind (LAW) pattern to contain exchange rate volatility. We document that under LAW, central banks outperform a constant size carry trade, as they additionally benefit from buying against cyclical deviations, and that the cost of reserves under the carry-trade view is generally lower than the one obtained from the credit-risk view (which equals the marginal cost to the country´s sovereign spread).
Topic:
Foreign Exchange, Economy, International Reserves, Trade, and Exchange Rates
Political Geography:
Global Focus

85. A Simple Theory of Economic Development at the Extensive Industry Margin

Author:
Dario Diodato, Ricardo Hausmann, and Ulrich Schetter
Publication Date:
09-2022
Content Type:
Working Paper
Institution:
The John F. Kennedy School of Government at Harvard University
Abstract:
We revisit the well-known fact that richer countries tend to produce a larger variety of goods and analyze economic development through (export) diversifcation. We show that countries are more likely to enter ‘nearby’ industries, i.e., industries that require fewer new occupations. To rationalize this fnding, we develop a small open economy (SOE) model of economic development at the extensive industry margin. In our model, industries difer in their input requirements of non-tradeable occupations or tasks. The SOE grows if proft maximizing frms decide to enter new, more advanced industries, which requires training workers in all occupations that are new to the economy. As a consequence, the SOE is more likely to enter nearby industries in line with our motivating fact. We provide indirect evidence in support of our main mechanism and then discuss implications: We show that there may be multiple equilibria along the development path, with some equilibria leading on a pathway to prosperity while others resulting in an income trap, and discuss implications for industrial policy. We fnally show that the rise of China has a non-monotonic efect on the growth prospects of other developing countries, and provide suggestive evidence for this theoretical prediction.
Topic:
Industrial Policy, Poverty, Reform, Economy, Diversification, Exports, and Convergence
Political Geography:
Global Focus

86. The Price of Speculation: Cryptocurrencies and Climate Change

Author:
Izaura Solipa and Gerald Epstein
Publication Date:
08-2022
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
Cryptocurrencies are a form of digital currency whose popularity has rapidly increased over the past decade. What distinguishes them from other electronic currencies is their underlying technology known as the blockchain, a decentralized public ledger in which transactions among the network peers are accurately and securely recorded. The validation and mining process, where new coins are issued, is highly computationally intensive and thus requires vast amounts of energy. The literature estimates energy consumption levels of the cryptocurrency mining to be as high as those of countries such as Angola, Iceland or Cuba, and a corresponding emission of at least 3-15 million tons of CO2. We discuss these estimated impacts of Bitcoin and other cryptocurrencies on both energy levels and the environment, and then outline alternative applications that could promote climate change mitigation. We argue that despite the latter applications and the possible benefits from the technology, particularly in the energy sector, the financial uses of blockchain are creating significant environmental costs without any clear social or economic benefit stemming from this largely speculative activity.
Topic:
Climate Change, Science and Technology, Economy, Cryptocurrencies, Blockchain, Digital Currency, and Speculation
Political Geography:
Global Focus

87. Inequality Can Only Be Fixed By Structural Economic Reform

Author:
Graeme Maxton
Publication Date:
03-2022
Content Type:
Journal Article
Journal:
Brown Journal of World Affairs
Institution:
Brown Journal of World Affairs
Abstract:
Inequality is like a slippery eel: it is easy to see but very hard to grasp. It has endured for centuries and has worsened recently.1 As a result of climate change, it is likely to become more of a problem in the future, bringing the risk of widespread instability. Although inequality has been a problem for a very long time, economists, social scientists, and political thinkers have failed to devise any lasting solutions. This is because the responses so far have been tepid-hearted, torn between three competing ideas.
Topic:
Reform, Inequality, and Economy
Political Geography:
Global Focus

88. The New Global Context for Development: The Unravelling of Progress in the LDCs

Author:
J. Brian Atwood
Publication Date:
03-2022
Content Type:
Journal Article
Journal:
Brown Journal of World Affairs
Institution:
Brown Journal of World Affairs
Abstract:
Development professionals follow a few overriding admonitions. Two important ones are “do no harm” and “understand the local context.” A third traditional injunction has recently gained even more relevance: “Think globally and act locally.” Yet today, there is a growing need to “think globally and act globally.” Bilateral and multilateral donor agencies like USAID and the World Bank have appropriately focused their work at the national and subnational levels. Local ownership is still a valid principle of development. However, transna- tional issues and the global economic outlook are now overwhelming local development progress. Particularly in the Least Developed Countries (LDCs), climate-related disasters, the COVID-19 pandemic, and the consequences of the war in Ukraine are quickly erasing development gains and exposing global inequality even more dramatically.
Topic:
Development, Foreign Aid, Inequality, Economy, and USAID
Political Geography:
Global Focus

89. Does environmental policy uncertainty hinder investments towards a low-carbon economy?

Author:
Joëlle Noailly, Laura Nowzohour, and Matthias Van Den Heuvel
Publication Date:
08-2022
Content Type:
Working Paper
Institution:
Centre for International Environmental Studies, The Graduate Institute (IHEID)
Abstract:
We use machine learning algorithms to construct a novel news-based index of US environmental and climate policy uncertainty (EnvPU) available on a monthly basis over the 1990-2019 period. We find that the EnvPU index spikes during the environmental spending disputes of the 1995-1996 government shutdown, in the early 2010s due the failure of the national cap-and-trade climate bill and during the Trump presidency. We examine how elevated levels of environmental policy uncertainty relate to investments in the low-carbon economy. In firm-level estimations, we find that a rise in the EnvPU index is associated with a reduced probability for cleantech startups to receive venture capital (VC) funding. In financial markets, a rise in our EnvPU index is associated with higher stock volatility for firms with above-average green revenue shares. At the macro level, shocks in our index lead to declines in the number of cleantech VC deals and higher volatility of the main benchmark clean energy exchange-traded fund. Overall, our results are consistent with the notion that policy uncertainty has adverse effects on investments for the low-carbon economy hindering progress to address the urgency of climate action.
Topic:
Environment, Finance, Economy, Investment, Institutions, and Decarbonization
Political Geography:
Global Focus

90. A lockdown a day keeps the doctor away: The effectiveness of non-pharmaceutical interventions during the Covid-19 pandemic

Author:
Anthonin Levelu and Alexander Sandkamp
Publication Date:
05-2022
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Countries have employed a variety of non-pharmaceutical interventions (NPIs) in order to curtail the COVID-19 pandemic. However, the success of individual measures in reducing the number of infections remains controversial. This paper exploits a panel data set of 107 countries to estimate the effects of 14 NPIs on the spread of the disease. While almost all measures had a dampening effect on the reproduction rate of the virus, public information campaigns and school closings were most effective, followed by testing policies, contact tracing and international travel restrictions. Public event cancellation and school closings were less effective during the second wave of the pandemic, while public information campaigns and the obligation to wear masks worked better. Several NPIs had a stronger impact on infections in autocratic countries, while others were less effective.
Topic:
Health, Economy, Public Policy, Public Health, and COVID-19
Political Geography:
Global Focus