VoxEU @ CEPR

@voxeu

VoxEU – CEPR’s policy portal - promotes "research-based policy analysis and commentary by leading economists". VoxEU columns cover all fields of economics broadly defined and are widely read.

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VoxEU @ CEPR@voxeu· 28d

P Dubois argues Europe should procure innovative on-patent medicines through a single European negotiation that fixes one wholesale price for the Single Market, while reintroducing equity across member states through differentiated national contributions & side transfers. ow.ly/75hy50ZnFMM #EconSky

Europe pays for innovative medicines through 27 uncoordinated national negotiations, generating access delays, cross-country pricing externalities, and a weak position vis-à-vis both pharmaceutical firms and US trade and most-favoured nation pressure. This column argues that Europe should procure innovative on-patent medicines through a single European negotiation that fixes one wholesale price for the entire Single Market, while reintroducing equity across member states through differentiated national contributions and side transfers. Decoupling what the innovator receives from what each country pays would end the pathologies of external reference pricing and parallel trade, restore Europe's bargaining power, and guarantee simultaneous access for all European patients.

VoxEU @ CEPR@voxeu· 28d

Daniel Gros & Silvan Hofer argue that the central result of the EU's fiscal rules can be approximated by a simple formula: the required primary balance equals the largest debt-stabilising primary balance in a ten-year period plus roughly 1% of the debt ratio. cepr.org/voxeu/column... #EconSky

The EU's fiscal rules in force since 2024 are often criticised for their complexity. The official implementation requires thousands of lines of code and a sophisticated debt sustainability analysis. This column argues that the central result can be approximated by a remarkably simple formula: the required primary balance equals the largest debt-stabilising primary balance in a ten-year period plus roughly 1% of the debt ratio. While this simplification cannot replace the full calculations, it helps demystify the debt rules and provides a shortcut for assessing the impact of policies on debt sustainability.

VoxEU @ CEPR@voxeu· 28d

Dino Pinelli provides a preliminary assessment of the macroeconomic impact of the EU Recovery and Resilience Facility in Italy, Greece, and Spain. He finds a positive impact on real GDP, and an even stronger impact on employment and investment. cepr.org/voxeu/column... #EconSky

Figure shows real GDP in Italy, Spain, and Greece compared to the control group. By 2025, real GDP was 10.8% above its 2019 level in Greece, 10.2% higher in Spain, and 6.4% higher in Italy, compared with an increase of only 5.4% in the control group

The EU Recovery and Resilience Facility was launched to support post-Covid recovery while accelerating structural transformation through investment and reform. This column provides a preliminary descriptive assessment of the macroeconomic impact of the facility in Italy, Greece, and Spain, three countries with large allocations. Using simple counterfactual comparisons, it presents evidence consistent with a positive impact on real GDP, and an even stronger impact on employment and investment in the three countries. The evidence also points to an expected positive impact on potential output in the years ahead.

VoxEU @ CEPR@voxeu· 28d

@galinah.bsky.social et al. discuss the concept of equal cumulative emissions in the European context and explore how Europe can start redesigning the Carbon Border Adjustment Mechanism to embed fairness principles. cepr.org/voxeu/column... #EconSky

The figure shows each country’s fair share of the remaining carbon budget under the allocation principle of equal cumulative emissions per person. Fair shares are computed as the population-weighted claim on the global remaining carbon budget adjusted for each country’s historical carbon debt accumulated over 1870-2022. Historical emissions are discounted at an annual rate of 2%. Positive values indicate remaining emission space, while negative values indicate that a country’s historical emissions already exceed its equal per-capita allocation. Values are expressed in GtCO2.

The idea of equal cumulative emissions per person is simple: every individual should have an equal claim on the atmosphere regardless of where they live. Using historical population and emissions data from 1870 onward, this column examines how the world’s remaining carbon budget could be allocated fairly across countries. European states have already consumed more than their share, whereas many developing countries retain positive claims. Allocating the remaining budget fairly can be compatible with development goals if developing countries can access cleaner technologies. Europe can start by redesigning the Carbon Border Adjustment Mechanism to embed explicit fairness principles.

VoxEU @ CEPR@voxeu· Jul 13

Historical evidence on global imbalances shows that adjustments are fairly common but slow; deficit and surplus narrowing work through different channels; and larger imbalances are significantly more likely to correct. Erik Frohm et al. cepr.org/voxeu/column... #EconSky

Figure: Summary statistics for cyclically adjusted and smoothed current account changes, by episode type. The sample covers 51 countries over 1980–2024. Current account changes are cumulative in percentage points of GDP; values are medians across episodes.

Global imbalances are back in the policy debate. This column examines 70 current account adjustment episodes across 51 economies from 1980 to 2024 to discover how large imbalances have unwound in the past. Three lessons stand out: adjustments are fairly common but slow; deficit and surplus narrowing work through different channels; and larger imbalances – especially deficits – are significantly more likely to correct.

VoxEU @ CEPR@voxeu· Jul 13

Ned Phelps, who passed away in May, shaped much of modern macroeconomics. Nobel laureate Peter Howitt discusses Phelps' theoretical contributions and how they created a micro foundation for macroeconomics. cepr.org/voxeu/column... #EconSky

The macroeconomic theory that is taught in graduate schools, and used in the conduct of monetary and fiscal policy around the world today, emerged from a revolution in economics that was led by Ned Phelps. This column discusses Phelps’s theoretical contributions and how they created a micro foundation for macroeconomics.

VoxEU @ CEPR@voxeu· Jul 13

Ursel Baumann et al. show that the decision by European firms to adopt AI is primarily driven by competition pressures rather than informational spillovers. Reducing invisible barriers to knowledge sharing across regions will be vital to closing AI investment gaps. cepr.org/voxeu/column... #EconSky

The figure presents treatment effects on posterior beliefs about domestic and foreign AI investment and on the AI investment rate, comparing control and treatment groups. Confidence intervals are at the 95% level. The figure is based on the Q4–2025 wave of the survey.

Europe has devoted substantial resources to fostering innovation and AI diffusion, through both centralised EU initiatives and national programmes. This column combines an experiment on 3,316 euro area firms with data from a large firm survey to demonstrate that that the decision to adopt AI is primarily driven by competition pressures rather than informational spillovers. If firms systematically underestimate their competitors’ AI investment – especially those abroad – informational gaps could be driving underinvestment. Reducing invisible barriers to knowledge sharing across regions may be just as vital as financial support for closing gaps in AI investment and innovation across Europe.

VoxEU @ CEPR@voxeu· Jul 13

Céline Azémar, Rodolphe Desbordes, Markus Eberhardt, & Eric Neumayer find evidence that a temperature shock reduces emigration rather than raising it, because climate stress cuts origin incomes and poor households cannot finance a costly international move. cepr.org/voxeu/column... #EconSky

Figure shows the effect of a one-degree origin-temperature anomaly on bilateral emigration, cumulative over twelve months, for all developing-country origins and for origins split at the median of long-run (1990–2018) baseline temperature.

Climate-driven displacement is widely expected to push millions across international borders. Drawing on monthly bilateral flows for 127 developing-country origins, this column finds the reverse: a temperature shock reduces emigration rather than raising it, because climate stress cuts origin incomes and poor households cannot finance a costly international move. On this evidence, the ‘climate refugee’ is the exception, and hardship more often traps poor populations in place than sets them moving.

VoxEU @ CEPR@voxeu· Jul 10

Joshua Aizenman, Jamel Saadaoui, Gazi Salah Uddin, and Naoki Yago show dollar and gold reserves are associated with smaller currency depreciations, especially where official dollar-liquidity backstops are absent and dollar liabilities are large. cepr.org/voxeu/column... #EconSKy

Figure shows the composition of international reserves. Panel (a) reports the composition of allocated official foreign exchange reserves. Panel (b) reports the market-valued gold share of total official reserves. Data on the Chinese yuan’s share are available from 2016 onwards.

Central banks are rethinking reserve portfolios as geopolitical fragmentation raises concerns about the accessibility of foreign-held assets, while dollar-funding stress keeps the US dollar at the centre of global financial stability. Using high-frequency US monetary policy surprises and minute-level exchange rates for 18 economies, this column shows that dollar and gold reserves are associated with smaller currency depreciations, especially where official dollar-liquidity backstops are absent and dollar liabilities are large. The findings highlight the importance of maintaining liquidity in the currencies where stress is likely, alongside sound domestic funding structures, credible policy frameworks, and prudent limits on unhedged foreign currency debt.

VoxEU @ CEPR@voxeu· Jul 10

@karicolombo.bsky.social & Elisa Failache find that greater lifetime exposure to high-speed internet reduces children’s scores in communication, problem solving, personal-social and socio-emotional skills. cepr.org/voxeu/column... #EconSky

FTTH exposure reduces the probability that a child is developing within normal ranges – as opposed to being flagged for monitoring or at risk of developmental delays – by 21 to 33 percentage points for communication and socio-emotional skills. A dose-response analysis shown in the figure confirms that the negative effects grow monotonically with the intensity of exposure, providing further confidence in a causal interpretation.

The rapid expansion of high-speed internet has intensified concerns about how digital technologies affect early childhood. Using the staggered rollout of fibre optic to the home in Uruguay as a natural experiment, this column finds that greater lifetime exposure to high-speed internet reduces children’s scores in communication, problem solving, personal-social and socio-emotional skills. The effects are partly explained by indirect channels, through the displacement of valuable activities for child development and alterations in caregivers’ behaviour.

VoxEU @ CEPR@voxeu· Jul 9

F Kindermann, @ckrolage.bsky.social, S Kunz, @pierrepannie.bsky.social, & K Ströhlein show that higher pension income reduces post-retirement labour supply, though the effect is modest and concentrated among retirees still close to the participation margin. cepr.org/voxeu/column... #EconSky

The figure displays difference-in-differences estimates contrasting individuals with higher and lower EIPC receipt. Panel (a) presents effects on annual pension income, confirming post-reform differences in pension income across groups, while Panel (b) shows the effect on unconditional labour earnings past retirement. The red dotted line marks the timing of the reform; capped vertical lines indicate 95% confidence intervals.

Can governments raise pensions for low-income retirees without discouraging them from working? Drawing on Germany's Earned Income Pension Credit, this column finds that higher pension income reduces post-retirement labour supply, but the effect is modest and concentrated among retirees still close to the participation margin. Two-thirds of the response runs through whether retirees work at all, including the often-overlooked decision to return to work after an earlier exit.

VoxEU @ CEPR@voxeu· Jul 9

S Benveniste et al. find that when corporate directors of French listed firms receive the Légion d’honneur, their companies' share price rise. State distinctions can provide investors with new info about a director's potential access to policymakers. cepr.org/voxeu/column... #EconSky

The figure plots compound abnormal returns in the days following an award announcement; bars show 95% confidence intervals. Observations are positions (firms x individual) at different dates. Pre-award connection status is defined as attendance at the same grande école, in the same or an adjacent cohort, as a politician involved in the awarding process.

State honours are designed as symbols of merit and public recognition. But they may also convey information with economic value. This column explores the market value of the Légion d’honneur. When corporate directors of French listed firms receive the honour, their companies’ share prices rise. This market reaction is concentrated among directors without a publicly observable educational link to members of the incumbent government before the award. The pattern suggests that state distinctions can provide investors with new information about a director’s potential access to policymakers.

VoxEU @ CEPR@voxeu· Jul 8

M Busse, F Caselli, & A Fotiou argue that the EU's Recovery and Resilience Facility has supported demand, helped advance reforms, and strengthened EU fiscal integration, but that complex plans and administrative bottlenecks have slowed disbursement. cepr.org/voxeu/column... #EconSky

Figure shows the EU share of total disbursements by sector, 2021-2026 (%). On the demand side, spending has been concentrated in sectors with strong short-term multipliers. In 2024, about half of RRF disbursements went to the construction sector.

The EU’s Recovery and Resilience Facility has become a central test case for performance-based fiscal policy. Its experience offers lessons for the design of the next Multiannual Financial Framework. This column reviews evidence on the facility’s economic impact, implementation, and use of milestones and targets. It argues that the facility has supported demand, helped advance reforms, and strengthened EU fiscal integration, but that complex plans and administrative bottlenecks have slowed disbursement. Future EU budget instruments should link reforms and investment while keeping plans focused, flexible, and aligned with implementation capacity.

VoxEU @ CEPR@voxeu· Jul 7

Jean-Jacques Hallaert & Iglika Vassileva find that housing unaffordability in the EU has large adverse impacts on housing adequacy, with noticeable impacts on poverty and health. The effects on fertility and labour force participation are smaller. cepr.org/voxeu/column... #EconSky

Figure summarises the results. Each coefficient is best interpreted as an elasticity. For example, a coefficient of 2.3 on the overcrowding rate implies that a country where housing costs as a share of disposable income are 1% above the EU average tends to have an overcrowding rate about 2.3% above the EU average, all else equal.

Housing affordability has moved to the forefront of Europe’s policy debate. While the economic literature has mostly focused on the drivers of housing unaffordability, this column examines its consequences in the EU. The authors find that increases in housing cost burdens have large adverse impacts on housing adequacy, with noticeable impacts on poverty and health. The effects on fertility and labour force participation are smaller.

VoxEU @ CEPR@voxeu· Jul 7

Asger Lau Andersen et al. use evidence from Denmark to show that negative deposit rates led to a strong decrease in deposits. Households appear to react more sharply when interest rates below zero are cut compared to when rates are positive. cepr.org/voxeu/column... #EconSky

Figure shows household responses to negative deposit rates. Exposure to negative deposit rates caused a strong decrease in deposits (Panel A): the treatment group exposed in 2019 differentially reduced their total deposit balances in the banking system by DKK 90,000 during 2019–2020 relative to a baseline of DKK 1.1 million. Individuals in the treatment group differentially increased their stock market holdings (Panel B) and contributions to illiquid pension accounts during 2019–2020 (Panel C). The treatment group differentially increased annual consumption by around DKK 40,000 during 2019–2020 (Panel D).

How households behave in an environment with deposit rates below zero is important for monetary transmission, but the literature is scant. This column studies household behaviour in the context of a major episode of negative interest rates in Denmark. This authors find that the negative deposit rates led to a strong decrease in deposits. Households appear to react more sharply when interest rates below zero are cut compared to when rates are positive. As depositors seem to consume more rather than hold more cash, policy rate cuts in negative territory may have particularly strong consumption effects.

VoxEU @ CEPR@voxeu· Jul 6

Neville Francis proposes a new measure of perceived inflation, which uses disaggregated inflation data with indicators for household attention to capture what people actually notice. The difference becomes particularly pronounced during periods of economic stress. cepr.org/voxeu/column... #EconSky

Figure shows perceived inflation and CPI inflation. Perceived inflation closely tracks CPI inflation over the long run, but it exhibits substantially greater short-run volatility. The divergence becomes particularly pronounced during periods of economic stress, including the Global Crisis 2008-09, the COVID-19 recession, and the inflation surge of 2021–22.

Households often report inflation perceptions and expectations that differ markedly from official measures. This column proposes a new measure of perceived inflation, which uses disaggregated inflation data with indicators for household attention to capture the prices that people actually notice. The difference between perceived and official inflation varies over time and becomes particularly pronounced during periods of economic stress. Heightened attention to inflation is persistent and can remain elevated even after official inflation measures improve. As central banks recognise the importance of household beliefs for macroeconomic outcomes, it becomes important to also understand the gap between measured and perceived inflation.

VoxEU @ CEPR@voxeu· Jul 6

Luiz de Mello, Ines Dezcallar, & @dougherty.bsky.social present evidence that suggests that European regions hosting defence production and supply chain activity have a larger economic footprint than comparable places without such activity. cepr.org/voxeu/column... #EconSky

Map shows defence production plants in TL3 regions in Europe.

Defence policy is usually discussed as a national security issue, but its economic effects are often highly local. This column presents new evidence from 1,011 regions in 15 European countries suggesting that places hosting defence production and supply chain activity have a larger economic footprint than comparable places without such activity: they enjoy higher income levels, and the premium is especially large in more innovative regions. As Europe raises defence spending, the geography of where that money ultimately lands may matter almost as much as the total amount.

VoxEU @ CEPR@voxeu· Jul 6

@remylevin.bsky.social & @danielavidart.bsky.social combine American panel and survey data to show that labour markets that prime-aged men experienced while growing up shaped their willingness to work decades later. cepr.org/voxeu/column... #EconSky

The figure plot the cohort decomposition of male labour force participation and lifetime labour market experiences.

Labour force participation among prime-aged American men has fallen for over half a century, and standard explanations leave much of the decline unaccounted for. This column combines panel and survey data to show that the labour markets these men experienced while growing up shaped their willingness to work decades later. These effects survive childhood moves across states and likely operate through men’s beliefs about whether work will pay off. If temporary downturns in labour demand can persistently influence labour supply, anchoring expectations about employment, not just inflation, may have a place in macroeconomic policy.

VoxEU @ CEPR@voxeu· Jul 3

The latest #VoxTalks episode on addressing global imbalances, with Gita Gopinath (@harvard.edu) and Philip Lane (@ecb.europa.eu). Recorded 19 June 2026 at the PSE-CEPR Policy Forum. What makes this third wave of global imbalances different? It's where the risk sits. 🎧 ow.ly/KSIB50Zk3W6 #EconSky

In the latest #VoxTalks Economics Episode, recorded on 19 June 2026 at the PSE-CEPR Policy Forum in Paris, Gita Gopinath (Harvard University) and Philip Lane (European Central Bank) joined Tim Phillips to discuss the third wave of Global Imbalances.

Twice before, global imbalances ended in major disruption: first with the Plaza Accord, then with the global financial crisis. So what makes this time different?

🎧 Listen to the full conversation now: https://cepr.org/multimedia/addressing-global-imbalances

#CentralBanking #Finance #International #Regulation #Economics

VoxEU @ CEPR@voxeu· Jul 3

Sanctions are found to reduce the number of cross-border mergers and acquisitions from sanctioning to target countries by around 50%, with stronger effects as time passes. Naoto Jinji & Shigenobu Kawaguchi cepr.org/voxeu/column... #EconSky

The use of sanctions has grown steadily over the past seven decades, with well-documented effects on bilateral trade. This column analyses the effects of sanctions on cross-border mergers and acquisitions from sanctioning to target countries over the period 2006-2023. It finds that sanctions reduce the number of deals by around 50%, with stronger effects as time passes. The impact is stronger in the mining, manufacturing, and energy sector than in the services sector. The results reinforce the broad-based potential effects of sanctions on private sector economic activity.

VoxEU @ CEPR@voxeu· Jul 3

Slowing growth, overlapping crises, tight fiscal conditions, and weak job-creation capacity make creating enough good jobs for young workers one of the defining development challenges in EMDEs of the next decade. Tommy Chrimes, M. Ayhan Kose, Kersten Stamm cepr.org/voxeu/column... #EconSky

The figure shows the youth surge in emerging markets and developing economies. The left panel shows the number of young working-age people in EMDEs by decade, the right panel shows youth cohorts by EMDE region. EAP = East Asia and Pacific; ECA = Europe and Central Asia; EMDEs = emerging market and developing economies; LAC = Latin America and the Caribbean; MNA = Middle East, North Africa, Afghanistan and Pakistan; SAR = South Asia; SSA = Sub-Saharan Africa. Bars show the number of young working-age people (aged 15–24), living in EMDEs (A) or EMDE regions (B) in each year.

Between 2025 and 2035, the largest-ever cohort of young people in emerging market and developing economies will reach working age. Slowing growth, overlapping crises, tight fiscal conditions, and weak job-creation capacity in many countries make creating enough good jobs for this generation one of the defining development challenges of the next decade. This column argues that, with determined policy action, this demographic wave can become a powerful engine of growth, poverty reduction, and development progress.

VoxEU @ CEPR@voxeu· Jul 2

When supply-chain bottlenecks make products harder to replenish, firms' pricing power increases, with the price increases further amplified by strategic responses to competitors' disruptions. Salomé Baslandze, @foxecon.bsky.social cepr.org/voxeu/column... #EconSky

The figure plots the New York Fed Global Supply Chain Pressure Index and 12-month US core CPI inflation.

Supply chain disruptions have become a recurring feature of recent economic dynamics and an increasing concern in inflation policy discussions. This column argues that inflationary effects of these disruptions operate through more than higher import and transportation costs: when supply-chain bottlenecks make products harder to replenish, firms’ pricing power increases, and these price increases are further amplified by strategic responses to competitors’ disruptions. Using new data that link consumer prices to US maritime import shipments by consumer goods producers, the authors show that these competitive pricing spillovers substantially amplified the price effects of supply chain disruptions in the aftermath of the pandemic in the US.

VoxEU @ CEPR@voxeu· Jul 2

Evidence from Japan shows that ageing and depopulation hit rural regions first. Outmigration from shrinking regions today reduces births tomorrow. However, policies that reduce spatial inequality also reduce aggregate efficiency. @eligiannone.bsky.social et al. cepr.org/voxeu/column... #EconSky

Figure shows the historical demographic divergence across Japanese municipalities between 1980 and 2010. Older municipalities in 1980 lost population and aged further, while younger municipalities tended to grow and remain younger.

Policy debates about ageing and shrinking populations often treat the problem as a national one. This column presents evidence from Japan showing that it is also profoundly spatial: ageing and depopulation hit rural regions first. Outmigration from shrinking regions today reduces births tomorrow, which makes the origin region older still. However, policies that reduce spatial inequality also reduce aggregate efficiency, presenting a trade-off that leaves policymakers with the challenge of choosing among different goals.

VoxEU @ CEPR@voxeu· Jul 1

Graduates of US high-tax & other elite universities produce 60-75% more impact-weighted publications than comparable economics PhD applicants. The 2025 endowment tax may slow scientific progress. J Angrist, M Diederichs, G Ellison cepr.org/voxeu/column... #EconSky

The bars show the distribution of publications for graduates of high-tax schools (MIT, Harvard, Stanford, Princeton, and Yale), other elite schools (Chicago, Northwestern, and Berkeley), other US schools, foreign schools, and applicants who did not graduate. The left panel (WDI) shows co-authorship- and journal-influence-weighted “deep impact” publications, grouped into 0, (0, 1], (1, 2], and 2+; the right panel shows top-five journal counts, grouped into 0, 1, 2, and 3+. The sample is limited to 1996–2010 MIT application cohorts.

The 2025 US university endowment tax hike, together with other financial pressures, is pushing the wealthiest universities to shrink their doctoral cohorts. This column exploits a novel sample of MIT Economics PhD applicants to shed light on the research value-added of elite doctoral programmes and the possible consequences of programme cutbacks. Holding applicant ability fixed, graduates of high-tax and other elite schools produce 60-75% more impact-weighted publications than comparable applicants. Neither peer effects nor home-journal favouritism explains this advantage. If elite PhD programmes add similar value in other disciplines, the endowment tax may well slow the pace of scientific progress.

VoxEU @ CEPR@voxeu· Jul 1

Ander Perez-Orive, Yannick Timmer, & Alejandro Van der Ghote show that the multiplicity of financing constraints dampens the transmission of expansionary monetary policy to firm borrowing, while amplifying the transmission of policy tightening. cepr.org/voxeu/column... #EconSky

$Panel A shows the financial indicators typically used to limit firm borrowing (y-axis) and the fraction of firms that face a financing constraint based on these indicators. Panel B plots the distribution of the number of tight financing constraints across firms. A longstanding puzzle in monetary economics is that policy tightening has stronger effects than easing. This column shows that the multiplicity of financing constraints notably dampens the transmission of expansionary monetary policy to firm borrowing and investment, while amplifying the transmission of policy tightening. This asymmetry arises because, when policy tightens, the most responsive constraint binds; whereas, when policy eases, the least responsive constraint limits the expansion of borrowing. A standard New Keynesian framework incorporating this mechanism shows that the decline in aggregate investment following contractionary monetary shocks is twice as large as the increase following equally sized expansionary shocks.$

VoxEU @ CEPR@voxeu· Jun 30

T Choukhmane, T de Silva, W Lin, & M Akuzawa show that AI financial advice is broadly consistent with what economists would prescribe. However, it also varies by how prompts are written, with different advice by gender, financial literacy, and prior AI experience. cepr.org/voxeu/column... #EconSky

Figure shows observed behaviour versus LLM-recommended behaviour over the life cycle. Red: survey respondents’ reported behaviour; green: one-shot LLM advice at current circumstances; blue: full life cycle simulation following LLM advice each year.

The rise of generative AI has raised hopes that high-quality, personalised financial advice might finally become cheap and universally accessible. This column develops a method to quantify the impact of following AI financial advice over a lifetime. The authors find that on the decisions that matter most for long-run wealth, such as investing in diversified equity or building a savings buffer, today’s leading models give advice broadly consistent with what economists would prescribe. But what people get from AI depends as much on the model's ability as on how they write their prompts, with the advice varying by gender, financial literacy, and prior AI experience.

VoxEU @ CEPR@voxeu· Jun 30

Fabio Comazzi et al. find ECB exchange rate communication has limited effects on the euro exchange rate, & any effects that do emerge tend to disappear quickly. This stands in contrast w/ monetary policy communication, which is a major driver of exchange rate movements. ow.ly/B2jG50Zixyt #EconSky

The figure shows the different exchange rate mentions in the ECB’s monetary policy statements over time, alongside the EUR/USD exchange. ‘Technical assumptions’: Exchange rate is mentioned as a technical assumption in the staff projections. ‘Monitoring’: Statements regarding the need to monitor the exchange rate due to its impact on the economy and inflation. ‘Economic effect of the exchange rate’: Statements regarding the exchange rate’s impact on the economy and inflation. ‘ECB concerned about volatility’ and ‘Unwelcomed move of the exchange rate’: statements expressing the ECB’s concerns about exchange rate volatility or direction/level of the exchange rate.

Evidence is mixed on whether central banks can influence exchange rates simply by talking about them. This column explores this question by analysing more than two decades of ECB communications. The authors find that exchange rate communication has only limited effects on the euro exchange rate, and any effects that do emerge tend to disappear quickly. This stands in contrast with monetary policy communication, which is a major driver of exchange rate movements. Financial markets seem to pay much more attention to what central banks do or say about monetary policy than to what they say about exchange rates.

VoxEU @ CEPR@voxeu· Jun 29

M Leonardo Bianchi, D Ruzzi, & A Segura find Italian banks do hedge against interest rate risk and, crucially, increase hedging when rates rise. Banks actively adjust hedging intensity through derivatives, consistent with a state-dependent model of risk management. cepr.org/voxeu/column... #EconSky

Figure shows the evolution of the combined interest rate risk exposure of bonds and swaps alongside the ECB deposit facility rate. As the tightening cycle begins in mid-2022, the net exposure of the banking system becomes progressively less negative. This occurs despite the continued accumulation of bond holdings, implying that banks actively increase derivative-based protection as interest rate risk materialises. This is consistent with a dynamic view of risk management.

Valuation losses can build quickly in response to higher interest rates, as demonstrated by the collapse of Silicon Valley Bank. This column shows that Italian banks do hedge against interest rate risk and, crucially, increase hedging when rates rise. This suggests banks actively adjust hedging intensity through derivatives, consistent with a state-dependent model of risk management. Institutions with lower capital ratios, a larger share of wholesale funding, and a smaller deposit base hedge more aggressively. These findings highlight the importance of considering derivative exposure in stress-testing frameworks, as derivatives are a key channel through which banks absorb shocks.

VoxEU @ CEPR@voxeu· Jun 29

The Commissioner of the BLS was dismissed in August 2025 amid allegations that agency data had been manipulated. The resulting loss of confidence may have reduced US GDP by roughly $20 billion. @nickbloom.bsky.social, E Groshen, D Hobbs, @michaelrstrain.bsky.social cepr.org/voxeu/column... #EconSky

This figure displays the daily Economic Policy Uncertainty Index in the week before and after August 1. The solid black line is the raw daily index and the dashed lines on either side of August 1 represent the average EPU index in the week before and week after August 1 respectively.

Trust in official economic statistics has become an increasingly salient policy issue, including in the US where the Commissioner of the Bureau of Labor Statistics was dismissed in August 2025 amid allegations that agency data had been manipulated. This column shows that the events produced a sharp increase in economic policy uncertainty, with existing estimates linking uncertainty to macroeconomic outcomes implying that the resulting loss of confidence may have reduced US GDP by roughly $20 billion. While some economic activity postponed during periods of uncertainty may eventually occur later, there are reasons to believe that at least part of the effect could be lasting.

VoxEU @ CEPR@voxeu· Jun 29

S Carattini et al. find that, following China's WTO accession, exporters get cleaner locally, coal-heavy grids turned export demand into dirtier air precisely around the location of coal powerplants, and the ability to produce with lower pollution spilled upstream. cepr.org/voxeu/column... #EconSky