Deflation is a threat to the macroeconomy. Japan had suffered from deflation for more than a decade, and now, Europe is facing it. To combat deflation under the zero interest bound, the Bank of Japan and the European Central Bank have resorted to quantitative easing, or increasing the money supply. This column explores its effectiveness, through the application of novel methods to distinguish signals from noises.
The productivity of a firm depends on its interaction with its suppliers and customers. This column uses unique data from Japan to investigate the wholesalers’ role in transaction networks, considering both sides of the transaction. The likelihood that a firm uses wholesalers increases with smaller buyer-side firms and larger seller-side firms. In addition, wholesalers tend to be located closer to their manufacturing buyers and further from their manufacturing sellers than manufacturers are to their direct manufacturing partners.
When looking at the potential effects of a trade policy, trade economists usually insist on the real income effects, often dismissing its unemployment effects as of second-order importance, whereas policymakers and the public at large tend to voice concerns about jobs gained or lost. This column presents a quantitative framework that weighs both concerns, which is especially important when real incomes and the unemployment rates move in the same direction following a trade reform.
Economists tend to focus on reforms that came after 1979 when explaining China’s soaring economic growth. This column argues that they shouldn’t. Mao’s policies also had a huge effect and should not be ignored. Economists and policymakers would do well to look further back in history. A long-term perspective might also help them bust a few myths along the way.
A nation’s hard power is based on its ability to coerce, while its soft power depends on the attractiveness of its culture, political ideals, and policies. This column shows that a country’s soft power has measureable effects on its exports. Countries that are admired for their positive global influence export more, holding other things constant.
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