EU institutions

Nicholas Crafts, 27 August 2014

It is well-known that World War I was expensive for Britain.  The indirect economic costs were also huge.  This column argues that the adverse implications of the Great War for post-war unemployment and trade – together with the legacy of a greatly increased national debt – significantly reduced the level of real GDP throughout the 1920s.  A ballpark calculation suggests the loss of GDP during this period roughly doubled the total costs of the war to Britain.

Masayuki Morikawa, 26 August 2014

Headquarters play important strategic roles in modern companies, but downsizing of headquarters is often advocated as a cost-cutting measure. This column presents evidence from Japanese firm-level data that headquarters size is positively associated with firms’ overall productivity. Moreover, the benefits of ICT are greater for companies with relatively large headquarters. Downsizing headquarters to cut costs may thus be harmful for long-term company performance.

Philippe Bacchetta, Kenza Benhima, 24 August 2014

Among the various explanations behind global imbalances, the role of corporate saving has received relatively little attention. This column argues that corporate saving is quantitatively relevant, and proposes a theory that is consistent with the stylised facts and useful for understanding the current phase of global rebalancing. The theory implies that, while the economic contraction originating in developed countries has pushed interest rates towards the zero lower bound, the recent growth slowdown in emerging countries could push them out of it.

Gaston Gelos, Hiroko Oura, 23 August 2014

The landscape of portfolio investment in emerging markets has evolved considerably over the past 15 years. Financial markets have deepened and become more internationally integrated. The mix of global investors has also changed, with more money intermediated by mutual funds. This column explains that these changes have made capital flows and asset prices in these economies more sensitive to global financial shocks. However, broad-based financial deepening and improved institutions can enhance the resilience of emerging-market economies.

Yoshiyuki Arata, 23 August 2014

One of the main models in industrial organisation assumes that firms grow in a response to many small shocks that satisfy the central limit theorem. This column shows that if the shocks do not follow the central limit theorem, then the firm growth follows a jump process. Such large jumps could be due to radical innovation and are vital for the long-term success of a firm.

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