Peng Xu, 03 August 2015

Corporate Japan is known for avoiding uncertainty. This is one of the reasons why changes of any kind are difficult – but not impossible – to realise. This column employs firm data to show that foreign direct investment has been changing corporate Japan by pursuing risk taking in private Japanese firms. This risk taking is positively related to firms’ sales growth and corporate earnings.

Steffen Altmann, Armin Falk , Simon Jäger, Florian Zimmermann, 03 August 2015

A key question for policymakers is how long-term unemployment can be effectively reduced. This column presents new evidence from a large-scale field experiment in which job seekers were provided with information and encouragement. The results indicate that targeted information provision can be an effective policy tool, in particular in the combat against long-term unemployment.

Angus Armstrong, Francesco Caselli, Jagjit Chadha, Wouter den Haan, 02 August 2015

Does monetary policy really face a zero lower bound or could policy rates be pushed materially below zero per cent? And would the benefits of reforms to achieve negative policy rates outweigh the costs? This column, which reports the views of the leading UK-based macroeconomists, suggests that there is no strong support for reforming the monetary system to allow policy rates to be set at negative levels.

Chun Chang, Kaiji Chen, Daniel Waggoner, Tao Zha, 01 August 2015

China’s spectacular growth over the 2000s has slowed since 2013. The driving force behind the country’s growth was investment, so the key to understanding the slowdown lies in understanding what sustained investment in the past. This column shows how a preferential credit policy promoting heavy industrialisation explains the trends and cycles in China’s macroeconomy over the past two decades. This policy was not without negative consequences, particularly in terms of the distortions it introduced for business finance. Going forward, China needs to focus on creating the right incentives for banks to make loans to small productive businesses.

Robert C. Merton, Richard T. Thakor, 01 August 2015

Effective delivery of ‘credit-sensitive’ financial services depends on the credit-worthiness of whoever provides the service. This column presents a new framework for understanding the relationships between customers, intermediaries and investors. From the perspective of the framework, designing efficient contracts that insulate customers from the credit risk of the intermediary and impose idiosyncratic risk on investors makes economic sense.

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