International and Monetary Economics Network

Could the macroeconomic damages from climate change be larger than previously thought?

Interesting paper by Adrien Bilal and Diego Känzig (Alumnus of the Master program in International and Monetary Economics). The paper led to lively debate on social media and elsewhere: https://x.com/drkaenzig/status/1791969124970594459

“ This paper estimates that the macroeconomic damages from climate change are six times larger than previously thought….Global temperature shocks correlate much more strongly with extreme climatic events than the country-level temperature shocks commonly used in the panel literature, explaining why our estimate is substantially larger“

https://dkaenzig.github.io/diegokaenzig.com/Papers/bk_micc.pdf
 
 
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„Sixty years of global inflation: a post-GFC update“
by Raphael Auer, Mathieu Pedemonte and Raphael Schoenle

„The extent to which international factors shape the inflation process has significant bearing on formulating domestic policy and maintaining economic stability. If inflation is associated with global factors, domestic policy tools may have less impact in controlling it, particularly in smaller and more open economies where external influences can be particularly strong. In light of these considerations, to what extent has the recent inflation experience been a global phenomenon?“
https://www.bis.org/publ/work1189.htm
 

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“Opportunities and challenges associated with the development of FinTech and Central Bank Digital Currency” by Stijn Claessens, Lin William Cong, Kose John, Fariborz Moshirian, and Cyn-Young Park in the Journal of Financial Stability:
 
“The purpose of this paper is to highlight the potential benefits and risks associated with CBDCs, including challenges and opportunities associated with proposed CBDC regulation in the United States and the European Union.“
https://www.sciencedirect.com/science/article/abs/pii/S1572308924000652
 

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The OECD published its Economic Outlook in May

“Global GDP growth is projected at 3.1% in 2024 and 3.2% in 2025, little changed from the 3.1% in 2023. This is weaker than seen in the decade before the global financial crisis, but close to currently estimated potential growth rates in both advanced and emerging market economies.”
https://www.oecd.org/economic-outlook/may-2024/


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Ten transformative trends in foreign direct investment

Interesting column by Bruno Casella, Richard Bolwijn, and Francesco Casalena:
„Global economic fracturing and shifting investment patterns: A diagnostic of ten FDI trends and their development implications“
https://cepr.org/voxeu/columns/global-economic-fracturing-and-shifting-investment-patterns-diagnostic-ten-fdi-trends
 
 
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Firms’ debt structure matters for monetary policy transmission

by Marie Alder, Nuno Coimbra, and Urszula Szczerbowicz

„Interest rate policy has a stronger impact on firm investment when the firm is more reliant on bank loans, while monetary policies that increase liquidity in bond markets, such as quantitative easing, have a stronger effect when firm financing is more market-based.“
https://cepr.org/voxeu/columns/firms-debt-structure-matters-monetary-policy-transmission
 
 
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„Lender of last resort regimes must improve in wake of Credit Suisse“ by Paul Tucker:
https://www.omfif.org/2024/05/lender-of-last-resort-regimes-must-improve-in-wake-of-credit-suisse/
 
 
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The qualitative (not quantitative!) reaction function of the European Central Bank

Very nice article on The ABCs of the ECB’s reaction function by Christophe Kamps from the ECB.

„…for monetary policy to be effective, central banks need to provide to the public at least qualitative information on what guides their decisions – their “reaction function” in economic parlance. This blog post takes a look at the three elements – the “ABCs” – of the ECB’s reaction function as communicated prominently since March 2023: the inflation outlook (A), the dynamics of underlying inflation (B) and the strength of monetary policy transmission (C).“
https://www.ecb.europa.eu/press/blog/date/2024/html/ecb.blog20240522~e3ec62dede.en.html
 
 
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Very interesting paper by Brad Setser on „Power and Financial Interdependence“ between the United States and China:

„The unbalanced Sino-American trade relationship has created asymmetric financial ties which generate potential sources of leverage for both parties and will not quickly disappear. Absent a clarifying major crisis, it will be difficult to definitively determine which party has greater leverage.“
https://www.ifri.org/en/publications/notes-de-lifri/power-and-financial-interdependence
 
 
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Interesting and thought-provoking: „Fiscal Consequences of Central Bank Losses“ by Stephen G. Cecchetti and Jens Hilscher

„In response to the Global Financial Crisis, central banks engaged in large-scale asset purchases funded by the issuance of reserves…As a result of rapidly increasing interest rates, these massive portfolios began producing substantial losses. We interpret these losses as fiscal policy consequences of quantitative easing and stress that they must be balanced against the prior benefits of implementing purchase policies.“
https://www.nber.org/papers/w32478
 
 
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„Some Thoughts on r*: Why Did It Fall and Will It Rise?“

Speech by Christopher J. Waller (Board of Governors of the Federal Reserve System)

„…as a policymaker, it is important to understand what is driving any movement in r* to justify using it to guide my policy deliberations. One cannot simply claim r* has risen based on gut feelings—there must be a reasonable economic explanation for why it has risen or fallen.“
https://www.federalreserve.gov/newsevents/speech/waller20240524a.htm
 
 
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„An analysis of pandemic-era inflation in 11 economies“ Many interesting results and thoughts in this paper by Ben S. Bernanke and Olivier Blanchard:
https://www.piie.com/publications/working-papers/2024/analysis-pandemic-era-inflation-11-economies
 
 
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Super interesting!

„Why Small Nations Surprisingly Succeed“ by Danny Quah

„…small nations are economically surprisingly successful. This finding contradicts the implications of theoretical models of national economies where aggregate economic performance draws on diversity, complexity, or increasing returns to scale. For small states to succeed relative to those economies that are larger but otherwise comparable, trade matters importantly.“

„The effects of technological improvement are not monotone, but vary with the wage-price characteristics of those sectors where technology pulls ahead.“
https://dannyquah.github.io/Storage/2024.02-Danny.Quah-Small-Nations-Success.pdf


 
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The Biden Tariff Analyzer by Kyle Handley

You try it out and learn a lot in a few minutes.
https://kylehandley.shinyapps.io/BidenTariffAnalyzer/


 
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Nice overview: The Importance of Central Bank Independence

„Central bank independence separates monetary policy from fiscal policy and thus protects political leaders from the temptation to erode the value of public debt through inflation.“
https://www.whitehouse.gov/cea/written-materials/2024/05/22/the-importance-of-central-bank-independence/